FROM AN EXPERIENCE
JESSE LIVERMORE – AN OVERVIEW
In his book “How to Trade Stocks” Richard Smitten talks about
Jesse Livermore the man and his trading techniques.
Here are some of his observations about the legend Jesse Livermore.
He quickly learned that it was never what the brokers,
or the customers, or the newspapers said — the only thing that
was important was what the tape said. The tape had a life of its own,
and its was the most important life. Its verdict was final.
He learned to be interested only in the change in price, not the
reason for the change. He had no time to waste trying to rationalize
the action of the stock. There could be a million reasons why the
price had changed. These reasons would be revealed later, after the fact.
He knew that unless he actually purchased a stock, he could never
know how he would handle himself. When a trader made a bet
everything changed, and he knew it. Then and only then did the
trader enter the heated jungle of emotions.. .fear and greed.
You either control them or they control you.
He worked alone.. .never telling anyone what he was doing,
never taking on a partner. The trill came from the winning,
not the money, though the money was nice.
He never blamed the market. It was illogical to get angry at an
inanimate object, like a gambler getting mad at a deck of cards.
There was no arguing with the tape. The tape was always right;
it was the players who were wrong.
His first conclusion was that he won when all the factors were in
his favor, when he was patient and waited for all the ducks to line
up in a row. That led him to his second conclusion, that no one
could or should trade the market all the time. There were times when
a trader should be out of the market, in cash, waiting.
To speculate, a trader had to be a player, not a theorist, or an
economist, or an analyst. A speculator had to be a player with
money down on the table. It was not the coach or the team’s owner
who won the game, it was the players on the field — just as it was not
the generals who won the battle, it was the grunts on the ground.
You had to lose, because it taught you what not to do… his conclusions
were developing from actual trading, from hands-on participation in
the market and constant analysis.
He never used the words bull market or bear market because these
terms tended to make too permanent a psychological mind-set.
Livermore was looking for the difference between stock gambling
and stock speculation. Livermore’s final conclusion was clear:
To anticipate the market is to gamble; to be patient and react only
when the market gives the signal is to speculate.
The first step was to concentrate on the overall market before making
a trade. He would follow the line of least resistance— up in a
bull market, buy long, down in a bear market, sell short.
If the market went sideways, he would wait in cash for a clear direction
to be established…. He would not anticipate the market by guessing
its direction… .Livermore had come to realize that the big money
was in the big swings… .it is the big moves that make the big money.
Livermore believed that stocks are never too high to begin buying
or too low to begin selling short. Livermore believed that there was
only one side of the market to avoid. He could be on the bull side
or the bear side — it made no difference to Livermore — just as long
as he was not on the wrong side.
From experience, Livermore knew that one of the hardest things
to do as a trader was to sell out a position early if he was wrong on
the initial purchase and the stock moved against him.
He did not care why things happened in the market, he cared only
what happened every day when the market opened…. He observed
that the market always did what it wanted to do, not what it was
expected to do.
Livermore had a steadfast rule that if something serendipitous,
an unplanned windfall, should occur, he must capitalize on it and
not be greedy — accept his good fortune and close out his position.
Livermore loved the fact that in trading the market there was no
end to the learning process. The game was never over, and he could
never know enough to beat the market all the time. The puzzle could
never be solved…he never considered himself a market master.
He always considered himself a market student who occasionally traded correctly.
Livermore had long ago realized that the stock market was never obvious.
It was designed to fool most of the people most of the time.
His rules were based on thinking against the grain:
cut your losses quickly; let your profits ride unless there’s a
good reason to close out the position; the action is with the leading
stocks, which change with every new market; new highs are to be
bought on breakouts; cheap stocks are often not a bargain, because
they have little potential to rise in price. The stock market is a study
in cycles. It never goes up forever, nor does it go down forever,
but when it changes direction it remains in that new trend until it is stopped.
He considered it necessary to act like a poker player in his business,
to never tip his hand or to react emotionally. Because of this inability
and unwillingness to express his emotions,
the stress on him was permanent.
Timing was everything to a speculator. It was never if a stock
was going to move; it was when a stock was going to move up or down.
Livermore always considered time as a real and essential trading
element. He often would say it’s not the thinking that makes
the money — it’s the sitting and waiting that makes the money
… .This has been incorrectly interpreted by many people to mean
that Livermore would buy a stock and then sit and wait for it to
move. This is not so. There were many occasions where Livermore
sat and waited in cash, holding little or no stock, until the right
situation appeared. He was able to sit and wait patiently in cash until
the perfect situation presented itself to him. When conditions came
together, when as many of the odds as possible were in his favor,
then and only then would he strike.
Livermore let the market tell him what to do, he got his clues and his
cues from what the market told him. He did not anticipate,
he followed the message he received from the tape.
It’s scary to think how much money Livermore would make if he
traded today.. .his ability to read the tape when the tape wasn’t even
that reliable. He is in our opinion the best ever. Since the market is
an extension of human psychology and human emotion and because
people don’t change, the market doesn’t change. The players change;
the underlying issues change; trading doesn’t change, and that’s
why over 60 years after he committed suicide, Livermore’s words
of wisdom are still relevant.
(to be contd)
TODAY’S TRADING STRATEGY
OF NIFTY FUTURES – NOV 19
All sell calls given yesterday reaches upto T2
and rocks as usual.
Intraday calls such as SKSMICRO, RCOM,TECHM
too worked out after breaking the mentioned levels
Got anything to comment now? (Pls do it)
What else do u want guys?
If u miss or suspect the recommendations,
it is but your destiny.
You would have watched exactly in yesterday’s session,
as mentioned Nifty finds resistance @ 6057 and
support @ 5925 and made a U-turn.
Now what to expect in today’s session?
Above 6035 Nifty future tends to kiss 6055 and
if cuts 6055 with good volume and sustain
for 15 minutes see an intraday hike upto 6077-92
On the other hand,
If unable to cut 6055 and trades below 6035
watch a slip upto 6005-5992-5977
BANK NIFTY
Buy btwn 12433-60
T1 – 12506-28
T2 – 12542-55-79
Sell btwn 12342-15
T1 – 12270-48
T2 – 12233-25-12197
SHARE TIPS TODAY (NOV 19)
1) Sell VIPIND @ 652
T1 – 645
T2 – 639
2) Sell RCOM @ 153.90
T1 – 150.90
T2 – 148.75
3) Sell SKSMICRO @ 637
T1 – 630
T2 – 623
4) Sell AXISBANK @ 1423.5
T1 – 1414
T2 – 1405
5) Sell ABGSHIP @ 434.75
T1 – 430.75
T2 – 426.80
6) Sell NEHAINT @ 213
T1 – 210
T2 – 207
7) Sell GSSAMERICA @ 341
T1 – 338
T2 – 335
IMPORTANT THINGS TO BE NOTED
1. NEVER EVER COVER THE POSTION TILL
TARGET1 IS ACHIEVED (TAKE YOUR OWN DECISION AFTER T1)
2.NEVER EVER ENTER INTO A TRADE
BEFORE THE ABOVE MENTIONED LEVELS
or AFTER THE TARGETS WERE ATTAINED.
3.STOPLOSS LEVELS, REVERSE TRADING
& MORE INTRADAY TIPS IN MARKET HOURS
EXCLUSIVELY TO THE SUBSCRIBERS
Solely I have all the rights to stop the free trials
provided in the very same space at any moment.
So do subscribe as soon as possible,
join hands with us and enjoy
AN ASTRAL VIEW OF MARKET TODAY
Transiting Moon will be passing through Sagittarius Zodiac sign.
Transiting Moon will be in applying aspect with Transiting Venus,
which indicates intraday traders are advised to enter in Market
after see the Momentum. Market trend would be volatile.
Market trend may change after 10.30. Market may go up
between 11.01 and 11.27. Market would gradually go down.
Market would close flat/down during last trading session.
Disclaimer
On repeated requests of the readers this astral prediction is started.
Traders are advised to attain some technical knowledge
before they get into trades anyway
-EDITOR
DENNIS GARTMAN's TRADING RULES
Some food for thought for the weekend. Trading rules from great traders are always worth reading. If you spend some time to understand the concept behind each trading rule this will improve your trading skills and take you to the next level. Also check this video where Dennis Gartman talks about the concept of keeping it simple.
1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
11. Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets and so also are their retracements.
17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
18. The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidlmayer taught us this twenty five years ago and it holds truer now than then.
21. There is never one cockroach! This is the “winning” new rule submitted by our friend, Tom Powell.
22. All rules are meant to be broken: The trick is knowing when… and how infrequently this rule may be invoked!
MESSAGE TODAY
Creativity of all kinds, in art, in prayer, in justice-making, in human relationships, is born where people wrestle with angels, outside Eden, on the border between heaven and earth, where they struggle to create a new form, a new song, a new template, a new ethic with all the discipline and passion they can bring to bear.
-KATHY GALLOWAY, introduction, Dreaming of Eden
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