Lessons from a legend - DFWstangs Forums
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post #1 of 1 (permalink) Old 11-01-2009, 10:21 AM Thread Starter
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Join Date: Jun 2002
Location: Where's my beer?
Posts: 21,924
Lessons from a legend


Jesse Livermore's trading rules:

1. Cut your losses quickly.
Use to struggle big time with this one. Took me years to get to letting profits ride and cutting loses quickly (typical human is opposite. take the profit and hold on waiting for the bad to come back.) I now enter trades with a predetermined level where my original premise for the trade gets broken.

2. Confirm your judgment before going all in.
Starting doing this more often. Typically I wait for confirmation before getting into a trade. Now I take a small position and wait for confirmation to get "all-in." A corollary to this would be "add to winning positions and not to losing positions."

3. Watch leading stocks for the best action.
Always been my mantra. Confirm the market direction, seek the sectors leading the market direction, seek the companies leading the sector. Fighting the big money is always a losing proposition.

4. Let profits ride until price action dictates otherwise.
See 1. I know stick with a trade until the original premise breaks down (either technically or fundamentally depending on why I got into the trade.) Move stops up accordingly.

5. Buy all-time new highs.
Always hard but rarely incorrect. I'd add short all-time lows. Really depends on the situation of the high or low.

6. Use pivot points to determine trends.
I'd add use pivot points along with swing highs and lows to determine probabl price action.

7. Control your emotions.
Still struggle with this one. Making critical and honest assessments in trading are always hard since many times your original premise is wrong or doesn't follow through. Since I trade more from a technical aspect (price action, not company fundamentals) I'm going to be wrong a lot of times. As long as my winners gain more than my losers lose (see rule 1) I'll be golden.

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