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Jesse Livermore :Timeless lessons

10 January 2011

All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis. The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor. Don¶t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don¶t be an impatient trader. It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your min d. Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes. When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day. Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend. A prudent speculator never argues with the tape. Markets are never wrongopinions often are. Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly. I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, wit h slight variations. This is because markets are driven by humansand human nature never changes. When you make a trade, you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade.

Tape reading was an important part of the game. it is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of ignorance. Remember that stocks are never to high for you to begin buying or too low to begin selling. to take a position and stick to it. The wise stock operators saw much ± that year. he must be both a student and a speculator. I found it one of the hardest things to learn. These two are the most expensive eighths in the world. as far as I¶m concerned it is a full-time jobperhaps even more than a job. . where many are called but few are singled out for success. The public. so was beginning at the right time. Without faith in his own judgment no man can go very far in this game. so was sticking to your position. That was the difference. A speculator must not merely be a student. Perhaps it is a vocation. I would then have not alone the will to be right but the knowledge to insure my being right. The big money is made by the sittin¶ and the waitin¶not the thinking. That is about all I have learned ± to study general conditions. I knew that some day I would find out what was wrong and I would stop being wrong. If you begin right you will not see your profitable position seriously menaced.I am fully aware that of the millions of people who speculate in the markets. But it is only after this that a stock operator can make big money. That is where the tape comes in ± to enable you to decide as to the proper time for beginning. Yet. with their eyes fixed on the stock market. But my greatest discovery was that a man must study general conditions. Give up trying to catch the last eighth ± or the first. And that would mean power. few people spend full time involved in the art of speculat ion. and then you will find no trouble in sitting tight. Wait until all the factors are in your favor before making the trade. Much depends upon beginning at exactly the right time. saw little ± that week. It was my sitting«Men who can both be right and sit tight are uncommon. to size them up so as to be able to anticipate probabilities. It was never my thinking that made big money for me.

And that is precisely what beats so many men on Wall Street who are very far from being in the main sucker class. but I didn¶t know it. or months. I forget it overnight. But being wrong ± not taking a loss ± that is what does damage to the pocketbook and to the soul. I learned that the weaknesses to which a speculator is prone are almost numberless. or weeks. No man can always .A loss never bothers me after I take it. Instead of hoping he must fear and instead of fearing he must hope. But what the dickens does that matter? Your business with the tape is now ± not tomorrow. In a narrow market. there is no sense in trying to anticipate what next big movement is going to be ± up or down. There is the plain fool. when prices are not getting anywhere to speak of but move in a narrow range. Of course there is always a reason for fluctuations. Observation. The speculator is not an investor. Therefore the thing to do is to determine the line of least resistance at the moment of trading. but there is the Wall Street fool. His object is not to secure a steady return on his money at a good rate of interest. There can¶t be because speculation is as old as the hills. A man may beat a stock or group at a certain time. memory and mathematics ± these are what the successful trader must depend on. who does the wrong thing at all times everywhere. Among the hazards of speculation the happening of the unexpected ± I might even say of the unexpectable ± ranks high. because that is his signal to get busy. but what the tape does not concern itself with the why and wherefore. Whatever happens in the stock market today has happened before and will happen again. who thinks he must trade all the time. and hope that his profit may become a big profit. But you must act instantly or be left. It doesn¶t go into explanations. The reason for what a certain stock does today may not be known for two or three days. but to profit by either a rise or fall in the price of whatever he is speculating in.He must fear that his loss may develop into a much bigger loss. and what he should wait for is the right moment when the line defines itself. but no man living can beat the stock market. A man must know himself thoroughly if he is going to make a good job out of trading in the speculative markets. experience. There is nothing new in Wall Street. The reason can wait. There is a time for all things.

Since suckers always lose money when they gamble on stocks ± they never really speculate. Much more to the game of speculation than to play for fluctuations for a few points. The average chart reader. that I wonder why I didn¶t then see both my trouble and the remedy for it. irrespective of broker execution. however. is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all . because being unable to tell precisely what is wrong. I should say that a chart helps those who can read it or rather who can assimilate what they read. It seems so obvious now that tape reading is not enough. A man must believe in himself and his judgement if he expects to make a living at this game. and it is not the bull side or bear side. however rigid the main laws may be. who feel that they must take home some money every day. as though they were working for regualr wages. Specualtion is a hard and trying business. and a specualtor must be on the job all the time or he¶ll soon have no job to be on. The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street even among the professionals. you cannot tell which way it is going. There is one side to the stock market. my game was to anticipate what was going to happen in a big way. There is nothing like losing all you have in the world for teaching you what not to do. but the right side.have adequate reasons for buying and selling stocks daily ± or sufficient knowledge to make his play an intelligent play. And when you know what not to do in order to lose money. Did you get that? You begin to learn! The game of speculation isn¶t all mathematics or set rules. I never argue with the tape. I can¶t tell you how it came to take me so many years to learn that instead of placing piking bets on what the next few quotations were going to be. Getting sore at the market doesn¶t get you anywhere. you begin to learn what to do in order to win. If a stock doesn¶t act right don¶t touch it.

If he pushes his confidence to its logical limit he is bound to go broke. the essential difference between betting on fluctuations and anticipating inevitable advances and declines. conservatively. or rather what I tried to do . to anticipate stock movements. I can see now that my main trouble was my failure to grasp the fundamental difference between stock gambling and stock speculation. It taught me little by little. It was the change in my own attitude that was of supreme importance to me. Everybody knew that the way to do that was to take profits and buy back your stocks on reactions. between gambling and speculating. . I had to study what was going to happen. And that is precisely what I did. I made up my mind to be wise and play carefully.there is to stock speculation.