Lessons from legendary traders: “stock market operator” jesse livermore

[zebrafx]

• Jesse Lauriston Livermore was born in Shrewsbury, Massachusetts on July 26, 1877.
• He started his trading career at the age of fourteen by posting stock quotes at the Paine Webber brokerage in Boston.
• By the age of fifteen, he had earned profits of over $1,000 ($23,000 in today’s dollars) by making a bet at bucket shops.
• He then moved to New York City and started trading in legitimate markets.
• Livermore first became famous after the Panic of 1907 when he sold the market short as it crashed.
• Livermore was worth $100 million after the 1929 market crash.

Here are ten stock trading rules that made Jesse Livermore’s one of the world’s greatest fortunes. Many successful stock and commodity traders still base their methods on these rules. Though Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

• Buy rising stocks and sell falling stocks.
• Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it’s rising you should be long, if it’s falling you should be short.
• Co-ordinate your trading activity with pivot points.
• Only enter a trade after the action of the market confirms your opinion and then enter promptly.
• Continue with trades that show you a profit, end trades that show a loss.
• End trades when it is clear that the trend you are profiting from is over.
• In any sector, trade the leading stock – the one showing the strongest trend.
• Never average losses by, for example, buying more of a stock that has fallen.
• Never meet a margin call – get out of the trade.
• Go long when stocks reach a new high. Sell short when they reach a new low.