Jesse Livermore is a legendary trader who made and lost several fortunes in the stock market during the early 20th century. His insights and strategies have been studied and emulated by traders for decades. In this third installment of “The Wisdom of Jesse Livermore,” we will explore some of his most valuable lessons for traders.
1. “The trend is your friend.”
Livermore believed that the most important factor in trading was the trend. He believed that traders should always follow the trend and never try to fight it. This means that if the market is trending up, traders should be buying, and if the market is trending down, traders should be selling. Trying to go against the trend is a recipe for disaster.
2. “Cut your losses quickly.”
Livermore was a firm believer in cutting losses quickly. He believed that traders should never let a losing trade run and should always have a predetermined exit strategy. This means that if a trade is not going as planned, traders should cut their losses and move on to the next opportunity.
3. “Let your profits run.”
On the flip side, Livermore also believed in letting profits run. He believed that traders should have a plan for taking profits, but should also be willing to let a winning trade continue to run as long as the trend is still intact. This means that traders should not be too quick to take profits and should be patient enough to let the market do its thing.
4. “Don’t be a hero.”
Livermore believed that traders should never try to be heroes. This means that traders should not try to predict the market or make big bets based on their gut feelings. Instead, traders should always follow their trading plan and stick to their strategy.
5. “Be patient.”
Finally, Livermore believed that patience was key to successful trading. He believed that traders should not be too quick to jump into a trade and should wait for the right opportunity. This means that traders should be patient enough to wait for the market to come to them and should not force trades.
In conclusion, Jesse Livermore was a master trader who had a deep understanding of the market. His insights and strategies are still relevant today and can help traders navigate the complex world of trading. By following his advice to follow the trend, cut losses quickly, let profits run, avoid heroism, and be patient, traders can increase their chances of success in the market.