Jesse Livermore

Jesse Livermore

Postby kennynah » Thu May 29, 2008 5:59 pm

frankly, i am not very fond of livernmore's tactics...simply becos i feel that the conditions under which he traded is very outmoded... however, some trading principals are still applicable today...

this is very mundane and all of us would have really heard of this saying...but one needs to really experience this time and again, in order to really appreciate the impact behind this thought...

Dont try and anticipate what the market will do next - simply go with the evidence of what the market is telling you - presenting to you
--Jesse Livermore


but frankly, it is a very fine line between "anticipating" and "going with the evidence"

if one does not "anticipate" going by the evidence, then we form no opinion and hence cannot possibly trade.

perhaps, it is better to understand this as, "dont try to PREDICT"

for a practical example...tonight 29may, US GDP revised figure will be released. While is highly touted to be an upward revision, we still should not "predict" the outcome of the index movement. To do so, will be simply gambling. It's a 50-50% chance it will go one way or the other.

instead, we can "anticipate" that the index, with high likelihood, that should the figure be revised away from the expected figure, then index may gyrate aggressively. so, with this "anticipation", we structure our trades in advance accordingly.

does this make sense?

love to have your views...
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Jesse Livermore

Postby winston » Thu May 29, 2008 8:25 pm

kennynah wrote:Dont try and anticipate what the market will do next - simply go with the evidence of what the market is telling you - presenting to you --Jesse Livermore


I think the quote was with respect to Market Direction. If in a bear market, short and vice versa.

kennynah wrote:instead, we can "anticipate" that the index, with high likelihood, that should the figure be revised away from the expected figure, then index may gyrate aggressively. so, with this "anticipation", we structure our trades in advance accordingly.


1) If people expect a good number and if it turns out as expected, the market will react mildly.
2) If people expect a good number and if it turns out negatively, the market will react violently.

So how to trade it ?

a) If (1) above happens, there could be a reversion to the mean after the initial move. So short it when it looks a bit extended ? A bit dangerous though as the trend may be ongoing..

b) If (2) above happens, look for the 50% retracement to short it. I think this is safer.

How about I move this discussion into the "Investor's Lounge" ?
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Jesse Livermore

Postby winston » Sat May 31, 2008 9:10 am

kennynah wrote:W: i noted you subscribe to a large extend JL's method of trading...


Ha Ha... once you have a read a book by a "Guru", it is very hard to erase those impressions.

Yes, buying in batches did come from JL. Also, I saw it as one of the 50 Trading Rules, which I have posted in the Trader's thread. I only buy in batches when I do not have the confidence to bet big. Very seldom do I have the confidence to bet big..

But I recall George Soros challenging someone b4. I think he said, "What, you call that a position ? If you are so convinced about your story, you need to back up the truck on that ". Not in those exact words but the meaning is there..

Take care,
Winston

P/S k, u still have not reply me on "anticipating something and trading accordingly". Check the few posts above this one..
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Jesse Livermore

Postby kennynah » Sat May 31, 2008 9:22 am

w : sorry, i didnt realise you were asking me for a response...hahaha...my england is getting from bad to worse...

i assume u r referring to this below...

1) If people expect a good number and if it turns out as expected, the market will react mildly.
2) If people expect a good number and if it turns out negatively, the market will react violently.

So how to trade it ?

a) If (1) above happens, there could be a reversion to the mean after the initial move. So short it when it looks a bit extended ? A bit dangerous though as the trend may be ongoing..

b) If (2) above happens, look for the 50% retracement to short it. I think this is safer.


actually hor...i will be candid...i am constantly modifying my pattern... like taekwando...white belt pattern is different from green belt and different again for brown... but fundamentally, the kick is like dat and that high block is like dat... whether black or white belt...except, the more seasoned ones deliver better results.

what i mean to say, is.... i am really trying to draw a line between "anticipating" and "predicting".... and even in anticipation mode, i run the risk to forerunning the market.... it has always been very hard for me to practice JL (and his subsequent follower, O'Neil) on truly letting the price/volume and other TAs, to lead my actions...

this could be becos, i trade options mainly, and it has a specific life span, as oppose to stocks. this means, i do not have as much a luxury of time on my side. the specific breakout trades sometimes perform slight corrections, before continuing its trend and that sometimes require a lengthy period. a period exceeding my options. of cos, i can choose to buy a futther out options...but that means at a considerable higher premium, which may not fit my reward/risk requirement.

so.....i am still learning...everyday....the market teaches me...and from all of you here at this forum...

macam, like no answer you hor?? hahaha
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Postby winston » Sat May 31, 2008 9:34 am

kennynah wrote:what i mean to say, is.... i am really trying to draw a line between "anticipating" and "predicting"...

this could be becos, i trade options mainly, and it has a specific life span, as oppose to stocks. this means, i do not have as much a luxury of time on my side.

macam, like no answer you hor?? hahaha


No, that is the answer. We all trade different instruments. Therefore, our behaviors are very different with respect to anticipating and predicting..

What works for me would not work for you..

As SunTze said, "if you know yourself and if you know your enemies, you will win a 1000 battles" :)

Take care,
Winston
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Jesse Livermore

Postby millionairemind » Mon Jun 09, 2008 3:25 pm

Considered one of the greatest stock operator of all times.. he called the top of 1929 right to the hour and made USD100MM in a single day.

His book "How to Trade in Stocks" is a classic for trend followers, just like "Securities Analysis" by Ben G. is to value investors.

Here are some of his wisdom on the market.

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 mind.

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 wrong opinions 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, with 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.

I am fully aware that of the millions of people who speculate in the markets, few people spend full time involved in the art of speculation. Yet, as far as I'm concerned it is a full-time jobperhaps even more than a job. Perhaps it is a vocation, where many are called but few are singled out for success.

The big money is made by the sittin' and the waitin'not the thinking. Wait until all the factors are in your favor before making the trade.

It was never my thinking that made big money for me. It was my sitting...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 this that a stock operator 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 ignorance.

Give up trying to catch the last eighth - or the first. These two are the most expensive eighths in the world.

Without faith in his own judgment no man can go very far in this game. That is about all I have learned - to study general conditions, to take a position and stick to it.

Remember that stocks are never to high for you to begin buying or too low to begin selling.

That is where the tape comes in - to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time.

If you begin right you will not see your profitable position seriously menaced; and then you will find no trouble in sitting tight.

The public, with their eyes fixed on the stock market, saw little - that week. The wise stock operators saw much - that year. That was the difference.

A speculator must not merely be a student, he must be both a student and a speculator.

Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them up so as to be able to anticipate probabilities.

I knew that some day I would find out what was wrong and I would stop being wrong. I would then have not alone the will to be right but the knowledge to insure my being right. And that would mean power.

A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking a loss - that is what does damage to the pocketbook and to the soul.

The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or fall in the price of whatever he is speculating in. Therefore the thing to do is to determine the line of least resistance at the moment of trading; and what he should wait for is the right moment when the line defines itself, because that is his signal to get busy.

In a narrow market, when prices are not getting anywhere to speak of but move in a narrow range, there is no sense in trying to anticipate what next big movement is going to be - up or down.

Instead of hoping he must fear and instead of fearing he must hope.He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.

A man may beat a stock or group at a certain time, 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.

I learned that the weaknesses to which a speculator is prone are almost numberless.

Among the hazards of speculation the happening of the unexpected - I might even say of the unexpectable - ranks high.

Observation, experience, memory and mathematics - these are what the successful trader must depend on.

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.

Of course there is always a reason for fluctuations, but what the tape does not concern itself with the why and wherefore. It doesn't go into explanations. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now - not tomorrow. The reason can wait. But you must act instantly or be left.

There is a time for all things, but I didn't know it. And that is precisely what beats so many men on 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 and selling stocks daily - or sufficient knowledge to make his play an intelligent play.

The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regualr wages.

I never argue with the tape. Getting sore at the market doesn't get you anywhere.

Much more to the game of speculation than to play for fluctuations for a few points.

There is one side to the stock market; and it is not the bull side or bear side, but the right side.

A man must believe in himself and his judgement if he expects to make a living at this game.

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.

It seems so obvious now that tape reading is not enough, irrespective of broker execution, that I wonder why I didn't then see both my trouble and the remedy for it.

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, my game was to anticipate what was going to happen in a big way.

Since suckers always lose money when they gamble on stocks - they never really speculate.

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 to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn! MM comments - This happens to me all the time... apply Lose Money Burnt Hand cream..:D

The game of speculation isn't all mathematics or set rules, however rigid the main laws may be.

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.

I should say that a chart helps those who can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke.

I can see now that my main trouble was my failure to grasp the fundamental difference between stock gambling and stock speculation.

I had to study what was going to happen; to anticipate stock movements.

It was the change in my own attitude that was of supreme importance to me. It taught me little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.

I made up my mind to be wise and play carefully, conservatively. Everybody knew that the way to do that was to take profits and buy back your stocks on reactions. And that is precisely what I did, or rather what I tried to do.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Jesse Livermore

Postby kennynah » Mon Jun 09, 2008 3:33 pm

do not let the market steal from you....

i remember i read that once he called his 2 sons to his study, as it was recorded...

he gave his sons $100 each and they can do as they please with it. but he instructed them to keep their money in their left pocket....saying "thieves will usually reach for the right pocket, becos most people are right handed and would keep their valuables in their right pockets"....

he said this becos he wanted his sons to understand that they are not to let others steal from them....drawing his lessons of losing to the market as being "stolen" from him....

actually...he went on and told his sons..."place your money in your left pocket and keep them close to your balls...bcos when someone tries to reach for it...you'd surely know....won't you?" :mrgreen: :mrgreen:
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Re: Jesse Livermore

Postby winston » Mon Jun 09, 2008 3:44 pm

<< The big money is made by the sittin' and the waitin', not the thinking. >>

This has always been interpreted wrongly. Many people only remember the sentence above but not the following sentence after that..

Many people thought that it means "time in the market". What JL was saying, is that you must wait until the stars are line up in your favor before you trade..

Hence;-

Wait until all the factors are in your favor before making the trade
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Re: Jesse Livermore

Postby kennynah » Mon Jun 09, 2008 3:49 pm

ah....w : this was what i was asking the last time...JL mentioned "time in the market"....actually what does he mean by that?
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Re: Jesse Livermore

Postby winston » Mon Jun 09, 2008 3:54 pm

Hi k,

I know you asked what JL meant by "time in the market" before..

However, I dont recall JL mentioning "time in the market".

"Time in the market" is a recent expression ( not sure who coined it ).

Take care,
Winston
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