Jesse Livermore

Jesse Livermore was one of the greatest traders to have ever lived.  He was the subject of the classic trading book Reminiscences of a Stock Operator.  A famous and must-read book if you haven’t yet. (Amazon link here.)

I must admit though I’m always a bit cautious about putting him on too much of a pedestal. Because even though he was undoubtedly a great trader, depression seemed to plague him and he ultimately committed suicide… no amount of great trading or wealth is worth that.

But let’s put shooting yourself in the face to one side for a moment… and focus on his trading and how made almost $1.5bln in today’s money trading stocks.

In the book, he drops some incredibly insightful phrases which are as relevant today as they were in the 1930s.

Let’s look at some of the best:

“Money cannot consistently be made trading every day or every week during the year”

Great line. Expecting the market to spit out profits like an ATM on your demand is arrogance. Calibrating to conditions and only trading when your edge presents itself is the key. Less is more.

“As long as a stock is acting right, and the market is right, do not be in a hurry to take profits”

Jesse traded stocks, but this applies to any market. If the trade is working, stay in the dam thing! We are all guilty of finding a reason to close a trade that’s working perfectly well. You’ve done the hard work, now let the market work for you!

“Never average losses”

We famously saw the quote “losers average losers” on Paul Tudor Jones’ office wall. Averaging into trades has been the downfall for too many potentially great traders. Just make it a golden rule. A line in the sand.

“The human side of every person is the greatest enemy of the average speculator”

I wonder what Livermore would have thought about algos?!

Anyway – he’s right of course. Discipline, rules, emotions, and being a human can be a trader‘s worst enemy. Constant work is needed. Be aware of your emotions and the impact they have on your trading

“It is much easier to watch a few than many”

Obviously, Livermore was talking about stocks here. But the same applies to any market. Don’t spread yourself too thin. Focus on a handful of markets at most. Get in tune with a few instruments that have a decent daily range and there’s more than enough opportunity.

Which is your favourite?