Jesse Livermore

[kennynah]

but i was sure he wrote "time" and he didnt mean in the sense of "timing the market"... aaarrrggghhhh....thorn in my flesh....aarrrgghhhh..... must go find out...

[millionairemind]

K,

One author, Richard Smitten, spent alot of his time compiling the story of Jesse Livermore into 2 books.

1. Trade like JL
2. JL: World's greatest stock trader

I have read the first one (available from the library) and don't recall reading about the question that you have. You might want to read the second book if you must find out.

Cheers,
mm

[kennynah]

MM : thanks...
in actual fact...it was in Richard Smitten's book (pages 131-137) that he spoke about JL's concept of "Time as the 4th Dimenion of Trading"... but hor...as we all know...these americanos... use words to gloss over the actual contents...hence duno what he was saying...
cheers mate

[winston]

I'vel read 3 books on JL. Not home so don't have the books in front of me.

One of them is Reminiscence of a Stock Operator + maybe the two above.. not sure.

[millionairemind]

Found this on Google Books

JL-World's Greatest Stock Trader
http://books.google.com.sg/books?hl=en& ... #PPA135,M1

Trade like JL
http://books.google.com.sg/books?id=ldJ ... #PPA137,M1

Perhaps the time as a trading dimension is what is comonly referred to as a TIME STOP?

Hope it helps. I only have Reminscience of a Stock Operator and How to trade in stocks.

[kennynah]

yes MM....time stop is among one of the topics within the concept of Time as a Dimension... but overall, there is something else within...perhaps it is richard smitten's own interpretation since both you and W, the Livermoreans, are not aware...

[HengHeng]

timers need to incorporate moon and sun or not ? .. full moon and lunar calender .. maybe works leh .. mai siao siao.

Then check the chinese calender to see what is the xiong month that month .. just stay at home and koons.

[kennynah]

hahaha.... plus must see own's 8 number to match it...

[millionairemind]

Read this on a website dedicated to Jesse Livermore. Maybe of some interest to some readers out there. Analysis by the webmaster from the book Reminiscience of a Stock Operator

(Chapter I) … “That’s all the fun there is – being right by using your head. If I was right when I tested my convictions with ten shares I would be ten times more right if I traded in a hundred shares. That is all that having more margin meant to me – I was right more emphatically. More courage? No! No difference! If all I have is ten dollars and I risk it, I am much braver than when I risk a million, if I have another million salted away.”

Amen on being right! This is truly the greatest reward of speculating! The huge profits are merely a pleasant byproduct. The real pleasure for speculators involves being right and being rewarded for being right!

Being in the private speculation, financial newsletter, and consulting businesses, I am really blessed to talk with all kinds of speculators around the world on a daily basis. One common opinion I note in many of the speculators newer to the game, and a myth I myself believed when I was younger, is that the size of one’s capital matters for success in speculation. In truth, size is irrelevant in the vast, vast majority of speculation!

If you are a new trader and all you have is $1000 to risk, don’t worry about it at all. If you are right and your trades are blessed with success, your stake, or “line” as Jesse Livermore called it, will grow. You have to cut your teeth and learn the art of speculation by beginning small, and only then can you eventually grow to become an elite speculator some day.

If you are faithful over a few things, successfully trading whatever meager capital you can scrape up initially, you will eventually be blessed with the opportunity to be a ruler over many things. If you sow the seeds of learning how to speculate starting small, you will eventually reap the magnificent harvests of speculating big with awesome amounts of capital.

Success in speculation is not related to one’s bankroll and a very small speculator takes the same risks and plays the game the same way as a large speculator. If you want to be a speculator, please don’t let your lack of capital intimidate you. Livermore himself went broke and started again from nothing several times, yet he still became so successful that he will be forever remembered as one of the greatest speculators in all of history. Everyone starts small.

(Chapter I) … “I knew something was wrong somewhere, but I couldn’t spot it exactly. But if something was coming and I didn’t know where from, I couldn’t be on my guard against it. That being the case I’d better be out of the market.”

Another common and deadly speculation myth is that speculators must always be in the markets playing the game. As Jesse Livermore wisely pointed out, this is foolishness. Once again the ancient King Solomon’s vast wisdom echoes through the ages, “To every thing there is a season, and a time to every purpose under the heaven.” There are times to trade and times not to trade.

Mr. Livermore noted that he had an uncomfortable feeling about the market in this quote but didn’t quite know why. Something in his subconscious was nagging at him but he couldn’t quite verbalize the thought. He wisely closed his position and evacuated. As a speculator it is always far better to be safe on the outside wishing one was in than being trapped on the inside hemorrhaging capital at frightening speeds and wishing one was out!

Speculation opportunities are legion and will always exist. Like missing a flight at an airport, it is never a big deal if you miss a particular speculation opportunity because there is always another one flying out somewhere behind it. In my own experience I have generally found that excellent speculation opportunities arise every few months or so.

If something just doesn’t feel right and you are uncomfortable with the markets for some reason, get out and don’t trade until your comfort returns. Worst case you will have to wait a few months or so for the next prime opportunity. Best case, however, you will avoid overtrading and finding yourself being flayed alive by a big loss during anomalous market conditions.

(Chapter II) … “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 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.”

This hugely important lesson ties in with the one above. Periodically the scales of probability tilt so favorably that a speculator commands high odds of emerging from a specific trade with outstanding profits. As Jesse Livermore learned, a prudent speculator will patiently bide his or her time to stalk a trade. They won’t actually commit a dime of capital until they are sure that market precedents favor the speculation they are about to embark upon. In Zeal Intelligence we christen these super-opportunities “The Big Trades”.

After Livermore found a speculation that had a high probability of success based on past market behavior, he learned the hard way that he should stick with his position. If he knew he “was right” going into a trade, he said he always won. I have also experienced this in my own personal speculation evolution. I have found that the times I really felt that a trade was “right” before I began were vastly more successful than the times I foolishly succumbed to temptation and traded on a flimsy whim. Planning is crucial and impulse trading is lethal!

Speculators must research the markets, patiently await an awesome opportunity, bravely deploy their capital ahead of the expected market move as contrarians, and diligently ride it out towards the original end they anticipated. If they fail to meticulously follow these 4 steps, research, stalking, deploying, and sitting tight, odds are their speculations will not be very successful on balance. Livermore knew his stuff!

(Chapter II) … “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. I proved it.”

Wow! This wisdom is sure controversial today! Jesse Livermore, one of the greatest speculators of all time, flat-out says that day trading is foolish. He points out that there are never “adequate reasons” to buy or sell stocks constantly, and that someone who tries to play the game of trading all the time is a “Wall Street fool”. Interestingly, Wall Street loves these suckers as their constant trading racks up enormous brokerage fees whether the speculators win or lose in the end.

In my own evolution as a speculator, I tried the day-trading game in early 2000 as the tech bubble was topping. I was primarily trading biotech and genomics stocks, entering and exiting single trades within hours or sometimes even minutes. Thankfully I emerged unscathed as I was blessed with modest profits after a couple months of this, but I will never forget the fantastic lessons I learned.

First, trading is stressful. The markets are a hard teacher. Every single time you have an open trade with your precious capital exposed to the markets, you burn some crucial psychological capital. Having open positions is always an emotional burden, sometimes it is light and sometimes it feels like a mighty lead anchor chained around your neck crushing you into powder. In day trading the ultimate stress and psychological capital cost is immensely higher because the volume of trades is so much higher. Today I prefer tactical speculations with multi-month time horizons, as far fewer trades are necessary so they are vastly less of an overall psychological burden.

Second, as Livermore wisely points out, there is no way to have “sufficient knowledge” to consistently intelligently day trade. Especially in the young Information Age today, speculators trying to absorb the torrents of financial information available are essentially trying to drink from a raging fire hose. If a speculator is buying or selling every couple hours every day, he or she cannot possibly have studied each trade enough to fully understand its risks and implications.

Third, the ultra-short-term intraday markets are inherently unpredictable and capricious. Any speculator can make an educated guess about whether the markets will be higher or lower a few months from now, but since information flow and general sentiment can shift so incredibly rapidly no one has a clue whether the markets will be up or down tomorrow. The shorter the expected time horizon for a trade, the more it resembles pure Vegas-style gambling and the less it is like intelligent speculation.

Fourth, a day trader is a slave to the computer. They must constantly be hunched among computers painstakingly watching minute-to-minute market movements and attempting to divine what on Earth will happen a half hour later. Day traders are always exposed and can seldom take mental or physical breaks. In sharp contrast, a tactical multi-month speculator can relax and enjoy life, virtually ignoring the markets for weeks at a time, once their capital is deployed and in position.

[millionairemind]

It was the same with all. They would not take a small loss at first but had held on, in the hope of a recovery that would let them out even. And prices had sunk and sunk until the loss was so great that it seemed only proper to hold on, if need be a year, for sooner or later prices must come back. But the break shook them out, and prices just went so much lower because so many people had to sell, whether they would or not.

MM comments - Think YangZiJiang... as it tanks slowly but gradually from >$2 all the way to 80cts...

Hope, Fear and Greed
The spectator'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, you hope that every day will be the last day and you lose more than you should had you not listened to hope. 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 loss may develop into a much bigger loss, and hope that his profit may become a big profit.
Jesse Livermore