"It takes a man a long time to learn all the lessons of all of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation."
Edwin LeFevre
Amen.
Fib
Best Market Quotes
Started by
fib_1618
, Jan 14 2004 06:56 PM
5 replies to this topic
#1
fib_1618
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Posted 14 January 2004 - 06:56 PM
Better to ignore me than abhor me.
“Wise men don't need advice. Fools won't take it” - Benjamin Franklin
"Beware of false knowledge; it is more dangerous than ignorance" - George Bernard Shaw
Demagogue: A leader who makes use of popular prejudices, false claims and promises in order to gain power.
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#2
norton
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Posted 14 January 2004 - 07:03 PM
and for those who don't know, Edwin Lefevre was the man who wrote the book
"Reminiscences of a Stock Operator" which was of course about the trading life of Jessie Livermore, to whom G's signature quote is attributed to. For many of us this book, available from Traders Press, was our first true love and introduction to the proper understanding of market behavior. It remains my favorite after 33 years now. I can't recommend it highly enough.
norton
Please, help stamp out vibration.
#3
mini-trader
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Posted 14 January 2004 - 07:45 PM
Jessie Livermore had some of the best quotes of all time.
Here are two that are perfect for now:
“But not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions.”
and
“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Here are two that are perfect for now:
“But not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions.”
and
“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
"Bottoms come fast...Tops take forever"
#4
rosedale
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Posted 14 January 2004 - 07:54 PM
Hi there,
I also think that the book and the lessons are priceless. I keep this one by my desk.
" A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss that is what does damage to the pocketbook and to the soul." J.L
It is amazing how many traders read this book first.
Happy trading,
I also think that the book and the lessons are priceless. I keep this one by my desk.
" A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss that is what does damage to the pocketbook and to the soul." J.L
It is amazing how many traders read this book first.
Happy trading,
#5
sagitarius_d
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Posted 15 January 2004 - 12:12 AM
Well my first book read on the stock market was not from Edwin Lefevre..Some parts of the book are really interesting,but not everything is very useful..That is my opinion though..It is interesting that people give the same quotes every time and on every board or article,and these quotes were the incentive that made me read the book..So if anyone wants to save on this book,go to google ,type "Jesse Livermore" and you will find most of his quotes for free and u will not be buying his book..
))
However the quotes mentioned above and many more made me a lot more flexible on the stock market..
For those of you lovers of JEsse's quotes,here are some from an old JEsse Livermore Thread on the old Traders-talk
Jesse Livermore, though he died over forty years ago, is still known today as one of the most colorful, flamboyant and respected market speculators of all time. Known by such epithets such as Boy Plunger, the Great Bear, The Wall Street Wonder and the Cotton King, Livermore both made, and subsequently lost, four multi-million dollar fortunes during his career as a speculator, which spanned three decades.
The man who was blamed for the 1929 crash and for precipitating in every market break from 1917 to 1940.
For the reader who is fascinated, as I always have been, with the life of Jesse Livermore, the King of the Speculators, I whole heartedly recommend that you read through the most sought after and best selling book ever written on the stock market,
Reminiscences of a Stock Operator.
Read about Livermore’s rise from no-where to gain his reputation as the best speculator in ever. Read how he made and agonizingly loses his multi-million dollar fortunes, time and time again.
Ever thought where such stock market wisdoms such as:
Fear your losses and let your profits run
It was never my thinking that made me money but my sitting tight
Markets are never wrong, opinions are
Came from? The man himself. Read and engrave these quotes into your mind if you want to survive as a trader!
As great a speculator as Livermore was I think the greatest education one can take from this book is realize it doesn’t matter how much money you make in the markets it’s the keeping hold of it that is important. Livermore never quite grasped this part.
In my mind, Darvas was every bit as good as Livermore in making money but much more importantly Darvas realized the importance of holding onto those gains in difficult market conditions.
Another work which is available is Livermore’s 1940 classic, How to Trade Stocks. This is his legacy to the speculator for all time, in which he states his philosophy of trading and lays down some ground rules. Rules he himself struggled to follow.
Trust Yourself
When you are handling surplus income to do not delegate the task to anyone. Whether you are dealing in millions or in thousands the same principal lesson applies. It is your money. It will remain with you just so long as you guard it. Faulty speculation is one of the most certain ways of losing it. Blunders by incompetent speculators cover a wide scale.
Losers Average Losers
I have warned against averaging losses. That is a most common practice. Great numbers of people will buy a stock, let us say at 50, and two or three days later if they can buy it at 47 they are seized with the urge to average down by buying another hundred shares, making a price of 48.5 on all. Having bought at 50 and being concerned over a three-point loss on a hundred shares, what rhyme or reason is there in adding another hundred shares and having the double worry when the price hits 44? At that point there would be a $600 loss on the first hundred shares and a $300 loss on the second shares. If one is to apply such an unsound principle, he should keep on averaging by buying two hundred shares at 44, then four hundred at 41, eight hundred at 38, sixteen hundred at 35, thirty-two hundred at 32, sixty-four hundred at 29 and so on. How many speculators could stand such pressure? So, at the risk of repetition and preaching, let me urge you to avoid averaging down.
More.
Margin
I know but one sure tip from a broker. It is your margin call. When it reaches you, close your account. You are on the wrong side of the market. Why send good money after bad? Keep that good money for another day. Risk it on something more attractive than an obviously losing deal.
Price Movement
We know that prices move up and down. They always have and they always will. My theory is that behind these major movements is an irresistible force. That is all one needs to know. 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 by steering your speculative ship along with the tide. Do not argue with the condition, and most of all, do not try to combat it.
Excerpts from Reminiscences of a Stock Operator
III
But there is only one side to the stock market; and it is not the bull side or the bear side but the right side.
A man must believe in himself and his judgment if he expects to make a living at this game.
V
If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that million come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
VII
People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up.
Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch. That is where your tape reading comes in--to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time. It took me years to realize the importance of this. It also cost me of some hundreds of thousands dollars.
VIII
If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his mistakes he wouldn't own a blessed thing.
X
The one game of all games that really requires study before making a play into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.
The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you hope that every day will be the last day--and you lose more than you should had you not listened to hope--to the same pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out--too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. he must fear that his losses may develop into a much bigger loss, and hope that his profit may become a bigger profit. It is absolutely wrong to gamble in stocks the way the average man does.
XII
Always sell what shows you a loss and keep what shows you a profit.
XIX
On the other hand there is profit in studying the human factors--the ease with which human beings believe what it pleases them to believe; and how they allow themselves--indeed, urge themselves--to be influenced by their cupidity or by the dollar-cost of the average man's carelessness. Fear and hope remain the same; therefore the study of psychology of speculators is as valuable as it ever was. Weapons change, but strategy remains strategy, on the New Exchange as on the battlefield. I think the clearest summing up of the whole thing was expressed by Thomas F. Woodlock when he declared: The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have past.
XX
Don't argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good--and cheap.
XXI
An investor looks for safety, for permanence of the interest return on the capital he invests. The speculator looks for a quick profit.
Jesse Livermore's Rules & Thoughts on Trading in Stocks
5. Profits always take care of themselves but losses never do.
8. Investors are the big gamblers, they make a bet, stay with it, and if it goes wrong, they lose it all.
12. Never buy a stock because it has had a big decline from its previous high.
Jesse L. Livermore was born in South Acton, Massachusetts, in 1877. At the age of fifteen he went to Boston and began working in Paine Webber's Boston brokerage office. His job was to post the stock and commodities prices on the brokerage's price quotations chalk board. He studied the price movements and began to trade on their price fluctuations. When Jesse was in his twenties he moved to New York City to speculate in trading in the stock and commodities market. Over a time period of fourty years of trading, he developed a knack for speculating on price movements in stock and commodity prices. He was said to have accumulated and lost millions of dollars several times over. He earned the nickname of Boy Wonder. Jesse Livermore created a set of trading rules, based upon the lesssons of his personal trading experience. One of his foremost rules was: Never act on tips.
The unofficial biography of Jesse Livermore was Reminiscences of a Stock Operator published 1923. Below are selected quotes:
Another lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But I didn't always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I'd have been right perhaps as often as seven out of ten times. In fact, I have always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game- that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily- or sufficient knowledge to make his play an intelligent play.
It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!
I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements- that is, not in reading the tape but in sizing up the entire market and its trend.
The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
…the average man doesn't wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn't even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.
To tell you about the first of my million dollar mistakes I shall have to go back to this time when I first became a millionaire, right after the big break of October, 1907. As far as my trading went, having a million merely meant more reserves. Money does not give a trader more comfort, because, rich or poor, he can make mistakes and it is never comfortable to be wrong. And when a millionaire is right his money is merely one of his several servants. Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss- that is what does damage to the pocketbook and to the soul.
What I have told you gives you the essence of my trading system as based on studying the tape. I merely learn the way prices are most probably going to move. I check up my own trading by additional tests, to determine the psychological moment. I do that by watching the way the price acts after I begin.
Of all speculative blunders there are few worse than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.
The loss of the money didn't bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.
In booms, which is when the public is in the market in the greatest numbers, there is never any need of subtlety, so there is no sense of wasting time discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privelege of proving conclusively that it cannot be found on this sordid earth. At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860's and 70's than in the 1900's. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
There are men whose gait is far quicker than the mob's. They are bound to lead- no matter how much the mob changes.
Few investors have made and lost fortunes to equal those of the legendary Jesse Livermore, a notorious stock market speculator during the first half of the 20th century. He often remarked, Markets are never wrong; opinions are.
Human nature is no different today than it was back in the 1920s and 1930s when Jesse Livermore was a major force on Wall Street. Investors have the same hopes and fears today that they had seventy or eighty years ago. Mr. Livermore saw repeatedly that the opinions of many of his colleagues were frequently wrong, as the market went on its own merry way in a direction contrary to what they had expected.
In these periods of gyrating markets where it is difficult to know the markets trend, Livermore remarked over 80 years ago:
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after an investor has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
Reminiscences of a Stock Operator published in 1923 offers timeless wisdom for all investors and traders:
Never act on tips.
Use a system and don't deviate from it.
Never buy a stock because it has had a big decline from its previous high.
If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
Don't blame the market for your losses.
Never add to a losing position. A losing position means you were wrong.
Stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit.
Always sell what shows you a loss and keep what shows you a profit.
Don't argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good--and cheap.
There is only one side to the stock market; and it is not the bull side or the bear side but the right side.
The speculator's chief enemies are always boredom from within.
A man must believe in himself and his judgment if he expects to make a living at this game.
Bulls and bears make money, but pigs get slaughtered.
Use money management at all times.
Establish your trading plan before the markets open.
Detailed your plan for each trade.
Establish entry and exit points and understand risk reward rations.
Accept small losses as part of the game if you want to win.
Trade markets from the short side.
Stand aside from a position, knowing you have taken a position.
Develop a trading plan for each potential situation you may face.
Do not look at quotes during the day.
Do not concentrate on break-even levels when you are losing.
Don't liquidate a winner to keep a loser.
Develop and maintain an exit plan. Follow this plan with rigid discipline.
Sustain your patience. Big movements take time to develop.
Don't be overly curious about the rationale behind a move. The key to wealth in trading is simplicity.
Here are some other thoughts from him :
A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul
It isn't as important to buy as cheap as possible as it is to buy at the right time.
There is only one side of the market and it is not the bull side or the bear side, but the right side.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.
http://www.gold-eagl...lton020303.html
http://www.gold-eagl...lton030303.html
))However the quotes mentioned above and many more made me a lot more flexible on the stock market..
For those of you lovers of JEsse's quotes,here are some from an old JEsse Livermore Thread on the old Traders-talk
Jesse Livermore, though he died over forty years ago, is still known today as one of the most colorful, flamboyant and respected market speculators of all time. Known by such epithets such as Boy Plunger, the Great Bear, The Wall Street Wonder and the Cotton King, Livermore both made, and subsequently lost, four multi-million dollar fortunes during his career as a speculator, which spanned three decades.
The man who was blamed for the 1929 crash and for precipitating in every market break from 1917 to 1940.
For the reader who is fascinated, as I always have been, with the life of Jesse Livermore, the King of the Speculators, I whole heartedly recommend that you read through the most sought after and best selling book ever written on the stock market,
Reminiscences of a Stock Operator.
Read about Livermore’s rise from no-where to gain his reputation as the best speculator in ever. Read how he made and agonizingly loses his multi-million dollar fortunes, time and time again.
Ever thought where such stock market wisdoms such as:
Fear your losses and let your profits run
It was never my thinking that made me money but my sitting tight
Markets are never wrong, opinions are
Came from? The man himself. Read and engrave these quotes into your mind if you want to survive as a trader!
As great a speculator as Livermore was I think the greatest education one can take from this book is realize it doesn’t matter how much money you make in the markets it’s the keeping hold of it that is important. Livermore never quite grasped this part.
In my mind, Darvas was every bit as good as Livermore in making money but much more importantly Darvas realized the importance of holding onto those gains in difficult market conditions.
Another work which is available is Livermore’s 1940 classic, How to Trade Stocks. This is his legacy to the speculator for all time, in which he states his philosophy of trading and lays down some ground rules. Rules he himself struggled to follow.
Trust Yourself
When you are handling surplus income to do not delegate the task to anyone. Whether you are dealing in millions or in thousands the same principal lesson applies. It is your money. It will remain with you just so long as you guard it. Faulty speculation is one of the most certain ways of losing it. Blunders by incompetent speculators cover a wide scale.
Losers Average Losers
I have warned against averaging losses. That is a most common practice. Great numbers of people will buy a stock, let us say at 50, and two or three days later if they can buy it at 47 they are seized with the urge to average down by buying another hundred shares, making a price of 48.5 on all. Having bought at 50 and being concerned over a three-point loss on a hundred shares, what rhyme or reason is there in adding another hundred shares and having the double worry when the price hits 44? At that point there would be a $600 loss on the first hundred shares and a $300 loss on the second shares. If one is to apply such an unsound principle, he should keep on averaging by buying two hundred shares at 44, then four hundred at 41, eight hundred at 38, sixteen hundred at 35, thirty-two hundred at 32, sixty-four hundred at 29 and so on. How many speculators could stand such pressure? So, at the risk of repetition and preaching, let me urge you to avoid averaging down.
More.
Margin
I know but one sure tip from a broker. It is your margin call. When it reaches you, close your account. You are on the wrong side of the market. Why send good money after bad? Keep that good money for another day. Risk it on something more attractive than an obviously losing deal.
Price Movement
We know that prices move up and down. They always have and they always will. My theory is that behind these major movements is an irresistible force. That is all one needs to know. 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 by steering your speculative ship along with the tide. Do not argue with the condition, and most of all, do not try to combat it.
Excerpts from Reminiscences of a Stock Operator
III
But there is only one side to the stock market; and it is not the bull side or the bear side but the right side.
A man must believe in himself and his judgment if he expects to make a living at this game.
V
If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that million come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
VII
People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up.
Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch. That is where your tape reading comes in--to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time. It took me years to realize the importance of this. It also cost me of some hundreds of thousands dollars.
VIII
If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his mistakes he wouldn't own a blessed thing.
X
The one game of all games that really requires study before making a play into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.
The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you hope that every day will be the last day--and you lose more than you should had you not listened to hope--to the same pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out--too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. he must fear that his losses may develop into a much bigger loss, and hope that his profit may become a bigger profit. It is absolutely wrong to gamble in stocks the way the average man does.
XII
Always sell what shows you a loss and keep what shows you a profit.
XIX
On the other hand there is profit in studying the human factors--the ease with which human beings believe what it pleases them to believe; and how they allow themselves--indeed, urge themselves--to be influenced by their cupidity or by the dollar-cost of the average man's carelessness. Fear and hope remain the same; therefore the study of psychology of speculators is as valuable as it ever was. Weapons change, but strategy remains strategy, on the New Exchange as on the battlefield. I think the clearest summing up of the whole thing was expressed by Thomas F. Woodlock when he declared: The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have past.
XX
Don't argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good--and cheap.
XXI
An investor looks for safety, for permanence of the interest return on the capital he invests. The speculator looks for a quick profit.
Jesse Livermore's Rules & Thoughts on Trading in Stocks
5. Profits always take care of themselves but losses never do.
8. Investors are the big gamblers, they make a bet, stay with it, and if it goes wrong, they lose it all.
12. Never buy a stock because it has had a big decline from its previous high.
Jesse L. Livermore was born in South Acton, Massachusetts, in 1877. At the age of fifteen he went to Boston and began working in Paine Webber's Boston brokerage office. His job was to post the stock and commodities prices on the brokerage's price quotations chalk board. He studied the price movements and began to trade on their price fluctuations. When Jesse was in his twenties he moved to New York City to speculate in trading in the stock and commodities market. Over a time period of fourty years of trading, he developed a knack for speculating on price movements in stock and commodity prices. He was said to have accumulated and lost millions of dollars several times over. He earned the nickname of Boy Wonder. Jesse Livermore created a set of trading rules, based upon the lesssons of his personal trading experience. One of his foremost rules was: Never act on tips.
The unofficial biography of Jesse Livermore was Reminiscences of a Stock Operator published 1923. Below are selected quotes:
Another lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But I didn't always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I'd have been right perhaps as often as seven out of ten times. In fact, I have always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game- that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn't know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily- or sufficient knowledge to make his play an intelligent play.
It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!
I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements- that is, not in reading the tape but in sizing up the entire market and its trend.
The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
…the average man doesn't wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn't even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.
To tell you about the first of my million dollar mistakes I shall have to go back to this time when I first became a millionaire, right after the big break of October, 1907. As far as my trading went, having a million merely meant more reserves. Money does not give a trader more comfort, because, rich or poor, he can make mistakes and it is never comfortable to be wrong. And when a millionaire is right his money is merely one of his several servants. Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss- that is what does damage to the pocketbook and to the soul.
What I have told you gives you the essence of my trading system as based on studying the tape. I merely learn the way prices are most probably going to move. I check up my own trading by additional tests, to determine the psychological moment. I do that by watching the way the price acts after I begin.
Of all speculative blunders there are few worse than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.
The loss of the money didn't bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.
In booms, which is when the public is in the market in the greatest numbers, there is never any need of subtlety, so there is no sense of wasting time discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privelege of proving conclusively that it cannot be found on this sordid earth. At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860's and 70's than in the 1900's. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
There are men whose gait is far quicker than the mob's. They are bound to lead- no matter how much the mob changes.
Few investors have made and lost fortunes to equal those of the legendary Jesse Livermore, a notorious stock market speculator during the first half of the 20th century. He often remarked, Markets are never wrong; opinions are.
Human nature is no different today than it was back in the 1920s and 1930s when Jesse Livermore was a major force on Wall Street. Investors have the same hopes and fears today that they had seventy or eighty years ago. Mr. Livermore saw repeatedly that the opinions of many of his colleagues were frequently wrong, as the market went on its own merry way in a direction contrary to what they had expected.
In these periods of gyrating markets where it is difficult to know the markets trend, Livermore remarked over 80 years ago:
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after an investor has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
Reminiscences of a Stock Operator published in 1923 offers timeless wisdom for all investors and traders:
Never act on tips.
Use a system and don't deviate from it.
Never buy a stock because it has had a big decline from its previous high.
If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.
Don't blame the market for your losses.
Never add to a losing position. A losing position means you were wrong.
Stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit.
Always sell what shows you a loss and keep what shows you a profit.
Don't argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good--and cheap.
There is only one side to the stock market; and it is not the bull side or the bear side but the right side.
The speculator's chief enemies are always boredom from within.
A man must believe in himself and his judgment if he expects to make a living at this game.
Bulls and bears make money, but pigs get slaughtered.
Use money management at all times.
Establish your trading plan before the markets open.
Detailed your plan for each trade.
Establish entry and exit points and understand risk reward rations.
Accept small losses as part of the game if you want to win.
Trade markets from the short side.
Stand aside from a position, knowing you have taken a position.
Develop a trading plan for each potential situation you may face.
Do not look at quotes during the day.
Do not concentrate on break-even levels when you are losing.
Don't liquidate a winner to keep a loser.
Develop and maintain an exit plan. Follow this plan with rigid discipline.
Sustain your patience. Big movements take time to develop.
Don't be overly curious about the rationale behind a move. The key to wealth in trading is simplicity.
Here are some other thoughts from him :
A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul
It isn't as important to buy as cheap as possible as it is to buy at the right time.
There is only one side of the market and it is not the bull side or the bear side, but the right side.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.
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