Jesse Livermore’s Trading Rules Written in 1940

  • Posted by on June 23rd, 2014 at 1:38 pm

Jesse Livermore was one of the greatest traders who ever lived. You can read more about him here. Here are his trading rules written in 1940. You will find that many of them still apply today, proving that very little changes in the market over time.

1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.

2. Money cannot consistently be made trading every day or every week during the year.

3. Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.

4. Markets are never wrong – opinions often are.

5. The real money made in speculating has been in commitments showing in profit right from the start.

6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.

7. One should never permit speculative ventures to run into investments.

8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.

9. Never buy a stock because it has had a big decline from its previous high.

10. Never sell a stock because it seems high-priced.

11. I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.

12. Never average losses.

13. The human side of every person is the greatest enemy of the average investor or speculator.

14. Wishful thinking must be banished.

15. Big movements take time to develop.

16. It is not good to be too curious about all the reasons behind price movements.

17. It is much easier to watch a few than many.

18. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.

19. The leaders of today may not be the leaders of two years from now.

20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.

21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.

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A Great Time To Be Patriotic

  • Posted by on July 1st, 2014 at 4:15 pm

I was very pleased to see the stock market make new highs today, but I still can’t believe the misery I keep hearing. Instead of finding people encouraged by this rally, this seems to be the most depressing celebration of new highs I have ever seen in my 18 years of trading. I have a bunch of thoughts, so I’ll just rattle them off:

1) For the first time in history, the majority of Americans (63%) believe that the FUTURE quality of life (for them and their kids) is going to be worse than the PAST. When you have this mind set and you think there’s nothing to look forward to, you are completely screwed. Bottom line: If you have a shitty frame of mind, you have no shot of success…in anything.

2) Let’s review one reason why many hate this market: They got crushed in 2008, they think Wall Street is full of crooks, and the whole game is rigged. My response: Investing is not easy! The market is not designed to just give money away. There will be times when you lose money, but the key is to have some form of a loss cutting discipline when you are wrong. If you don’t have the time to watch things, then hire someone who will, or just invest in something else you feel more comfortable with. But living in the past and complaining about something that happened over 5 years ago will get you nowhere.

3) Another complaint is that the economic data does not correlate to the strong stock market. HELLO! NEWS FLASH! The economy does not equal the stock market! In 1979-1982, the economic picture was horrible but the stock market started to emerge from a long consolidation. You know what it was doing? It was anticipating a new President who was about to implement a reduction in government spending, lower tax rates, and an overall business-friendly environment. Maybe it’s doing the same again?

3) This rally is all because of the Fed. That’s funny, because ever since the Fed started reducing their bond buying program, the market has gone up and rates have come down! Again, you can complain all day or take advantage of this market friendly environment.

4) The experts on TV say a crash is coming. Think about it, when do you turn on the Weather Channel? You do it when a storm, tornado, or hurricane is coming. No one watches the Weather Channel when it’s 85 degrees and sunny outside. When do you think Financial TV had their best ratings? During the collapse of 2008. It is TV’s job to promote fear in order to get better ratings. If you are not mentally tough and you get easily swayed by what people say on TV, then turn it off…or become mentally tougher :)

5) This all ends bad. No shit it ends bad, it always does. But maybe we go higher for longer than most people think before it ends bad. Again, you can’t live in fear. Have a process, have a discipline, and stick to it.

I’ll leave you with this. Two things are almost always true: 1) The world keeps getting better and 2) The people always think it’s getting worse. We live in amazing times! There are some incredible innovators who continue to develop advances in technology that make our lives better. With this long holiday weekend coming up, it’s a great time to be grateful for our freedom and to focus on the amazing times we live in. You can continue to live in fear and bet on the end of the world, but just remember, even if you are right, there will be no one left to pay you off. Happy 4th to everyone and God Bless!

I can be reached at: [email protected].

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