VoyForums
[ Show ]
Support VoyForums
[ Shrink ]
VoyForums Announcement: Programming and providing support for this service has been a labor of love since 1997. We are one of the few services online who values our users' privacy, and have never sold your information. We have even fought hard to defend your privacy in legal cases; however, we've done it with almost no financial support -- paying out of pocket to continue providing the service. Due to the issues imposed on us by advertisers, we also stopped hosting most ads on the forums many years ago. We hope you appreciate our efforts.

Show your support by donating any amount. (Note: We are still technically a for-profit company, so your contribution is not tax-deductible.) PayPal Acct: Feedback:

Donate to VoyForums (PayPal):

[ Login ] [ Contact Forum Admin ] [ Main index ] [ Post a new message ] [ Search | Check update time | Archives: 1, 2, [3], 4 ]

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Date Posted: 05:40:26 06/28/03 Sat
Author: peter wong
Subject: Re: notes on Jessy Livermore's Trading Guidelines
In reply to: peter wong 's message, "notes on Jessy Livermore's Trading Guidelines" on 03:11:29 06/28/03 Sat

Emotional-Control Rules

Emotional control is the most essential factor in playing the market.

Don¡¦t anticipate! Wait until the market gives you the clues, the signals, the hints, before you move. Move only after you have confirmation. Anticipation is a killer. Don¡¦t make a decision based on anticipation. The market always gives you time. If you wait for the clues, there will be plenty of time to execute your moves.

Don¡¦t spend a lot of time trying to figure out why the price of a particular stock moves. Rather, examine the facts themselves. The answer lies in what the tape says, not in trying to figure out why. Most important, never argue with the tape. It can¡¦t hear you.

Stock traders can be convinced to move away from their own convictions by listening to the advice of other traders, persuaded that their judgment may be faulty. Or, in the least damaging case, listening to others may cause indecision and bad judgment. This indecision may cause a loss of confidence, which may well mean a loss of money.

Tips come from sources ¡V from relatives, loved ones, friends who have just made serious investments themselves and want to pass on their good fortune. They also come from hucksters and criminals. Remember: All tips are dangerous. None should be taken.

Remove hope from your trading lexicon. Hoping a stock will do something is truly gambling. If you do not have good, solid reasons for holding a stock position, then move on to another more logical trade. Wishing a stock up or down has caused the downfall of many stock market speculators. Hope walks hand in hand with greed.

Be aware of your emotions at all times. Don¡¦t get too confident over your wins or too despondent over your losses.

Nothing ever changes in the market. The only thing that changes are the players, and the new players have no financial memory of the previous major cycles ¡V like the panic of 1907 or the crash of 1929 ¡V because they have not experienced them. It may be new to the speculator, but it¡¦s not new to the market.

Always have a method of speculating, a plan of attack. And always stick to your plan. Do not constantly change your plan. Find a method that works emotionally for you, and stick to that method. Stick to your own customized game.

Speculators are not investors. Their object is not to secure a steady return on their money over a long period of time. Speculators must profit by either a rise or a fall in the price of whatever they have decided to speculate in.

Play a lone hand. Make your decisions about your own money by yourself. Be secretive and silent in your stock trading. Do not disclose your winners or your losers.

The successful investor is not invested in the market all the time. There are many times when you should be completely with cash. If you are unsure of the direction of the market, wait.

Never lose control of your emotions when the market moves against you. And never become elated with your success to such a degree that you think the market is an easy way to make money. Never fight the tape; the tape is the truth. Seek harmony with the tape.

Stay in the business you¡¦re good at.

It takes four strong mental characteristics to be a superior market trader:
* Observation
The ability to observe the facts without prejudice

* Memory
The ability to remember key events correctly and objectively

* Mathematics
The ability to calculate numbers easily; being at home with digits

* Experience
The ability to learn, to retain knowledge gained through experience and call upon it at will.

Subliminal messages, apparent impulses, are nothing more than the subconscious mind talking to you, calling up years of trading experiences. On occasion, Livermore let his inner mind lead him, even if he did not know the reason at the time. He agreed with Aristotle: ¡§We are the sum total of our experience.¡¨

Emotions must be understood and harnessed before successful speculation is possible:

* Greed is a human emotion present in all people, defined by Webster¡¦s dictionary as the excessive desire for acquiring or possessing; a desire for more than one needs or deserves. We do not know the origin of greed, all we know is that it exists in every person.

* Fear lies ready to appear in a single heartbeat, and when it does, it distorts reason. Reasonable people act unreasonably when they are afraid. And they become afraid every time they start to lose money. Their judgment becomes impaired.

* Hope lives hand in hand with greed when it comes to the stock market. Once a trade is made, hope springs alive. It is human nature to be hopeful, to be positive, to hope for the best. Hope is important the survival of the human species. But hope, like its stock market cousins ignorance, greed, and fear, distorts reason. Hope clouds facts, and the stock market only deals in facts. It is like the spinning of a roulette wheel ¡V the little black ball tells the outcome, not greed, fear, or hope. The result is objective and final, with no appeal.

Beware of ignorance. The market must be studied and learned, not in a casual fashion but seriously and deeply. The stock market, with its allure of easy money and fast action, induces people into the foolish mishandling of their money like no other entity. The reverse of ignorance is knowledge, and knowledge is power.

The stock market is never obvious. It is designed to fool most of the people most of the time. These rules are often based on thinking against the grain.

You should not be in the market all the time. There are times when you should be out of the market, for emotional as well as economic reasons.

When the tape doesn¡¦t agree with your decision to buy or sell, wait until it does. Never try to rationalize your position with what the tape is saying.

Do not give or receive stock tips; just remember: In a bull market stocks go up, in a bear market they go down. This is all anyone needs to know, or all you need to tell them.

Stock speculators sometimes make mistakes, and know that they are making them, but proceed anyway, only to berate themselves later for breaking their own rules. Do not break your rules.

Never become an involuntary investor by holding a declining stock.

Never think about buying a stock on reactions, or shorting a stock on rallies.

Do not use the words bullish or bearish. These words fix a firm market direction in the mind for an extended period of time. Instead use upward trend and downward trend when asked the direction you think the market is headed. Simply say: The line of least resistance is upward, or downward, at this time.

Speculation is a business, and like any other business it takes hard work and diligence to succeed.

Jesse Livermore : ¡§There is nothing new on Wall Street or in stock speculation. What had happened in the past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the way of human intelligence.¡¨

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Replies:

  • Re: notes on Jessy Livermore's Trading Guidelines -- peter wong, 06:41:37 06/28/03 Sat
    [ Contact Forum Admin ]

    Forum timezone: GMT-8
    VF Version: 3.00b, ConfDB:
    Before posting please read our privacy policy.
    VoyForums(tm) is a Free Service from Voyager Info-Systems.
    Copyright © 1998-2019 Voyager Info-Systems. All Rights Reserved.