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Date Posted: 06:41:37 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

Excerpts from Reminiscences of a Stock Operator

III

But there is only one side to the stock market; and it is not the bull side or the bear side but the right side.

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

V

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. No diagnosis, no prognosis. No prognosis, no profit.

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 million come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

VII

People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up.

Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch. That is where your tape reading comes in--to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time. It took me years to realize the importance of this. It also cost me of some hundreds of thousands dollars.

VIII

If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his mistakes he wouldn't own a blessed thing.

X

The one game of all games that really requires study before making a play into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.

The speculator'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 hope that every day will be the last day--and you lose more than you should had you not listened to hope--to the same pioneers, big and little. 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 losses may develop into a much bigger loss, and hope that his profit may become a bigger profit. It is absolutely wrong to gamble in stocks the way the average man does.

XII

Always sell what shows you a loss and keep what shows you a profit.

XIX

On the other hand there is profit in studying the human factors--the ease with which human beings believe what it pleases them to believe; and how they allow themselves--indeed, urge themselves--to be influenced by their cupidity or by the dollar-cost of the average man's carelessness. Fear and hope remain the same; therefore the study of psychology of speculators is as valuable as it ever was. Weapons change, but strategy remains strategy, on the New Exchange as on the battlefield. I think the clearest summing up of the whole thing was expressed by Thomas F. Woodlock when he declared: "The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have past."

XX

Don't argue with the tape. Do not seek to lure the profit back. Quit while the quitting is good--and cheap.

XXI

An investor looks for safety, for permanence of the interest return on the capital he invests. The speculator looks for a quick profit.

Jesse Livermore's Rules & Thoughts on Trading in Stocks

5. Profits always take care of themselves but losses never do.

8. Investors are the big gamblers, they make a bet, stay with it, and if it goes wrong, they lose it all.

12. Never buy a stock because it has had a big decline from its previous high.

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