Investing Tips from the King of Old Wall Street
By Steven Samblis
One of the world's most well known and successful traders, Jesse Livermore, was the king of Wall Street in the early 1900?s. To this day, his success is legendary. Livermore?s prowess as a trader has been written about and analyzed in hundreds of books and articles. To rehash old insights into the man?s philosophy would be a disservice to the pure talent that he brought to the investing world. Instead, we have decided to go a different route and give you a summary of his of trading wisdom in his own words.
Though the early 1900?s are long gone, and the markets have changed a great deal, one thing remains the same. A solid foundation of strategy and understanding can make an investor very wealthy. The markets have always held opportunity. Understanding opportunity, seeing opportunity, and jumping in before it is gone is the only way to win. What follows is a collection of quotes made by Jesse Livermore about the markets and the way he traded them. You should find them to be very much to the point and in some cases, a blinding flash of the obvious. When you finish reading them, look back at how you have traded in the past. Judge for yourself. How would have done if you had known and kept these rules in mind when you trade? Enjoy!
"The recording of past performances under similar conditions becomes of inestimable value to the investor or speculator. At such times he must entirely ignore personal opinion and apply strict attention to the action of the market itself. Markets are never wrong - opinions often are."
"After forming a definite opinion with respect to a certain stock or stocks - do not be too anxious to get into it. Wait and watch the action of the stock or stocks marketwise."
"My real money has been made in commitments showing a profit right from the start."
"As long as a stock is acting right, and the market is right, do not be in a hurry to take a 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 losses never do."
"I believe that by keeping proper records and taking the time element into consideration, one can with a fair degree of accuracy forecast coming movements of importance. But it takes patience to do so."
"Never sell a stock because it seems high priced. Conversely never buy a stock because it has had a big decline from its previous high."
"It is foolhardy to make a second trade if your first trade shows you a loss.?
"After a normal reaction, a rally on less volume than the previous one could be showing that the stock is harder to buy and the next movement will be much more rapid.?
?One cannot be successful speculating every day or every week; there are only a few times a year, possibly four or five, when you should allow yourself to make any commitment at all.?
"It is not well to be too curious about all the reasons behind price movements. You risk the danger of clouding your mind with non-essentials. Just recognize that the movement is there and take advantage of it."
"It is dangerous to start spreading out all over the market. Do not have an interest in too many stocks at one time. It is much easier to watch a few than many."
"When you clearly see a move coming in a particular group, act upon it. But do not let yourself act in the same way in some other group, until you plainly see signs that the second group is in a position to follow suit. Have patience and wait."
"Confine your studies of movements to the prominent stocks of the day. If you cannot make money out of the leading stocks, you are not going to make money out of the market as a whole."
"If you analyze correctly the course of two stocks in the prominent groups, you need not worry about what the rest are doing. Keep mentally flexible. Remember the leaders of today may not be the leaders two years from now."
"A new age of markets has been ushered in - an age that offers safer opportunities for the reasonable, studious, competent investor and speculator."
"At the risk of repetition and preaching, let me urge you to avoid averaging down."
"Margin call - when it reaches you, close your account. You're on the wrong side of the market."
"A person engaged in the business of speculation should risk only a limited amount of capital on any one venture."
"A speculator should make it a rule to each time he closes out a successful deal to take one-half of his profit and lock it up for reserves."
"Rome was not built in a day, and no real movement of importance ends in one day or in one week. A large part of a market movement occurs in the last 48 hours of play, and that is the most important time to be in."
"When a speculator can determine the pivotal point of a stock and interpret the action at that point, he may make a commitment with the positive assurance of being right from the start."
"Bear in mind when using pivotal points in anticipating movements, that if the stock does not perform as it should after crossing the pivotal point, this is a danger signal which must be heeded."
"Every time I lost patience and failed to await the pivotal points and fiddled around for some easy profits in the meantime, I would lose money."
"The study of pivotal points is fascinating almost beyond belief. You will find a golden field for personal research. You will derive a singular pleasure and satisfaction from successful trades based on your own judgment. You will discover that profits made in this way are immensely more gratifying than any which could possibly come from the tips or guidance of someone else."
"If you make your own discovery, trade your own way, exercise patience, and watch for the danger signals, you will develop a proper trend of thinking."
"Every movement of importance is but a repetition of similar price movements. Just as soon as you familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements."
"I do not consider these records perfection but I do know a basis is there for anticipating future movements and if anyone will study these records, keeping them themselves, they cannot fail to profit by it their operations."
"Too many speculators buy or sell impulsively, acquiring their entire line at almost one price. Suppose you want 500 shares, then start with 100. If the market advances, buy another 100 shares and so on. Each succeeding purchase must be made at a higher price. By following this rule you will come nearer to being on the right side of the market than by any other method with which I am familiar."
"The market will tell the speculator when he is wrong, because he is losing money. When he first realizes he is wrong is the time to clear out, take his losses, try to determine the cause of his error, and await the next big opportunity. It is the net result over a period of time in which he is interested." |
