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Saturday, September 3, 2016

READ: 'How to Trade in Stocks' by Jesse Livermore

The story of Jesse Livermore, a legendary speculator of 100 years ago, is widely known in a narrow trading circles. Any list of trading books I ever saw included 'Reminiscences of Stock Operator' - a fictional account of Boy Plunger, loosely based on his life and endeavors. Surprisingly, I never saw a mention of his own book. Jesse Livermore himself wrote a small book in 1940, shortly before he taken his own life. Aptly named 'How to Trade in Stocks', this short text is an instruction manual for an intelligent stock market operator, with major concepts and techniques just as valid today, as they were 100 years ago.

Have a taste:

"...let me warn you that the fruits of your success will be in direct ratio to the honesty and sincerity of your own efforts in keeping your own records, doing your own thinking, and reaching your own conclusions."

"To be consistently successful, an investor or speculator must have rules to guide him. Certain guides that I utilize may be of no value to anyone else... No guide can be 100% right."

"Confine your studies of movements to the prominent stocks of the day. If you cannot make money out of the leading active issues, you are not going to make money out of stock market as a whole.... Keep mentally flexible. Remember, the leaders of today may not be the leaders two years from now."

"It would be simple to run down the list of hundreds of stocks which, in my time, have been considered gilt-edge investments, and which today are worth little or nothing. Thus, great investments tumble, and with them the fortunes of so-called conservative investors in the continuous distribution of wealth."

"There are times when money can be made investing and speculating in stocks, but money cannot consistently be made trading every day or every week during the year. Only the foolhardy will try it. It just is not in the cards and cannot be done."

"... you must entirely ignore personal opinion and apply strict attention to the action of market itself. "Markets are never wrong - opinions often are.""

"As long as stock is acting right, and the market is right, do not be in a hurry to take profit. You know you are right, because if you were not, you would have no profit at all. ... Profits always take care of themselves but loses never do."

"It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let that thought be written indelibly upon your mind.'

"What i am trying to make clear to that part of the public which desires to regard speculation as a serious business, and I wish deliberately to reiterate it, is that wishful thinking must be banished; that one cannot be successful by speculating every day or every week; that there are only a few times a year, possibly four or five, when one should allow yourself to make any commitments at all. In the interim's you are letting the market shape itself for the next big movement. If you have timed the movement correctly, you first commitment will show you a profit at the start. From then on, all that is required of you is to be alert, watching for the appearance of the danger signal to tell you to step aside and convert paper profits into real money."

The second part of the book (Livermore Market Key) is a detailed description of his trading system, with rules, explanations and examples of JL's own trading sheets. You must see it for yourself. It's a gem!

I don't know what happened with the original book - I couldn't find it on Amazon. The only option is this publication, including some guy's 'commentary' which can be completely disregarded.
 Clicking on this link will take you to Amazon.com. If you buy this book or something else I will receive small commission that helps to support this free website.

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