The stock market has certainly produced its share of heroes and villains
over the years. And while villains have been many, the heroes have been few.
One of the good guys (for me, at least) has always been Jesse L. Livermore.
He’s considered by many of today’s top Wall Street traders to be the greatest
trader who ever lived.
Leaving home at age 14 with no more than five bucks in his pocket, Livermore
went on to earn millions on Wall Street back in the days when they still
literally read the tape.
Long or short, it didn’t matter to Jesse.
Instead, he was happy to take whatever the markets gave him because he knew
what every good trader knows:Markets
never go straight up or straight down.
In one of Livermore’s more famous moves, he made a massive fortune betting
against the markets in 1929, earning $100 million in short-selling profits
during the crash. In today’s dollars, that would be a cool $12.6 billion.
That’s part of the reason why an earlier biography of his life, entitledReminiscences
of a Stock Operator, has been a must-read for experienced traders and beginners
alike.
A gambler and speculator to the core, his insights into human nature and the
markets have been widely quoted ever since.
Here are just a few of his market beating lessons:
On the school of
hard knocks:
The game taught me the game. And it didn’t spare me rod while
teaching. It took me five years to learn to play the game intelligently enough
to make big money when I was right.
On losing trades:
Losing money is the least of my troubles. A loss never troubles me
after I take it. I forget it overnight. But being wrong – not taking the loss –
that is what does the damage to the pocket book and to the soul.
On trading the
trends:
Disregarding the big swing and trying to jump in and out was fatal
to me. Nobody can catch all the fluctuations. In a bull market the game is to
buy and hold until you believe the bull market is near its end.
On sticking to his
plan:
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
favoured my play. There is the plain fool, who does the wrong thing at all
times everywhere, but there is also the Wall Street fool, who thinks he must
trade all the time.No man can have adequate
reasons for buying or selling stocks daily – or sufficient knowledge to make
his play an intelligent play.
On speculation:
If somebody had told me my method would not work, I nevertheless
would have tried it out to make sure for myself, for when I am wrong only one
thing convinces me of it, and that is, to lose money. And I am only right when
I make money. That is speculating.
On respecting the
tape:
A speculator must concern himself with making money out of the
market and not with insisting that the tape must agree with him. Never argue
with it or ask for reasons or explanations.
On human nature and
trading:
The speculator’s deadly enemies are: Ignorance, greed, fear and
hope. All the statute books in the world and all the rule books on all the
Exchanges of the earth cannot eliminate these from the human animal.
On riding the trend
to the big money:
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.
On the nature of
Wall Street:
Wall Street never changes, the pockets change, the suckers change,
the stocks change, but Wall Street never changes, because human nature never
changes.
So, what ever happened to Jesse L. Livermore?
He didn’t die a poor man–not by
any stretch of the imagination.
But he did take his own life, believing he was “a failure,” which
proves once again that money can’t buy happiness.
http://moneymorning.com/2013/01/04/nine-lessons-from-the-greatest-trader-who-ever-lived/
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