"Stock Market Wizard" Jesse Livermore's Trading Wisdom

In every field of human endeavor,

There are always only a few who stand out as extraordinary and exceptional! Jesse Livermore is such a person,

He is a solitary individual,

A silent and mysterious man; he is a genius in speculation,

A legend on Wall Street!

Jesse Livermore immersed himself in the stock market for over 40 years,

After experiencing four rises and falls,

He authored the immortal classic on speculation—"How to Trade in Stocks."

This book combines practice,

And theory; it contains legends,

And disillusionment.

Livermore was a genius speculator,

His single-handed efforts,

His mastery of techniques,

Earned him the legendary wealth of his time; but due to human weaknesses,

He fell from grace,

Became disillusioned and took his own life with a gunshot.

His life was a grand,

And breathtaking super-market trend.

His entire life is the best interpretation of the words "speculation."

This book, written by himself based on his legendary experience as the main thread,

Should be a must-read for every aspiring successful speculator! In the book,

The incisive words repeatedly give readers psychological shocks,

And the operations filled with heroic spirit and spirituality also bring readers tremors and enlightenment.

Livermore’s book,

Livermore himself,

Has undoubtedly caused many people,

And will continue to cause many,

To understand the true meaning of trading,

And to contemplate the vastness of life!

What exactly does the big trader want to tell us? I summarize it into nine points,

The statements after the key points are mostly quotes from Livermore’s original words,

Now, let us listen carefully to the teachings of the master from seventy years ago!

The market has rules,

The regularity of the market stems from unchanging human nature!

A lesson I learned early on,

Is that Wall Street has no new things.

Wall Street cannot have new things,

Because speculation is as old as mountains.

What happens in the stock market today has happened before,

And will happen again.

I have never forgotten this.

What I really can’t remember is when and how it happened,

The way I remember these facts,

Is through experience.

Wall Street never changes,

But wallets do,

Stocks do; but Wall Street never changes,

Because human nature never changes.

I believe,

The true enemy of the speculator is losing control of his emotions,

Hope,

Fear, and greed always exist,

They hide in our hearts,

They wait outside the market,

Waiting to jump into the market to perform,

Waiting for the opportunity to make a big profit; at any time,

Fundamentally,

Because of greed,

Fear,

Innocence, and hope.

People always repeat their behaviors in the same way—this is why the patterns and trends formed by numbers always repeat unchanged.

Be patient and wait for the market’s truly perfect trend,

Do not make predictive interventions; "Timing is everything,"

Buy at the right time,

Sell at the right time.

Trading is not something to do every day,

Those who think they must trade at all times,

Ignore one condition,

That is,

Trading requires reasons,

And these reasons must be objective,

And appropriate.

Besides figuring out how to make money,

Traders must also figure out how to avoid losing money.

Knowing what should be done,

Is almost as important as knowing what should not be done.

A stock operator must contend with many costly enemies within his mind.

Making big money relies on "waiting,"

Not on thinking.

You must wait until all factors favor you.

Predicting the market is so difficult,

Because human nature,

Mastering and conquering human nature is the most difficult task.

Careful timing is very important...... rushing in,

Will cost you dearly.

My losses are entirely due to lack of patience,

Failing to wait for the right moment to support the preconceived views and plans.

I don’t understand that 15 years later,

Some things allow me to wait for a long two weeks,

Watching my highly promising stocks rise 30 points,

And only then do I feel safe to buy. It takes patience,

Waiting for the right key points,

Waiting for the right trading opportunities.

Patience,

Patience,

Patience—this is his secret to grasping opportunities,

And achieving success.

He often says: "Profit is not from ideas,

But from waiting quietly."

All a person needs to do is observe what the market is telling him,

And respond accordingly.

The answer is in the market itself,

The challenge lies in making the correct interpretation of the presented facts.

"Timing is everything,"

Before entering a trade,

The most important thing is to determine whether the least resistance line aligns with your trading direction.

My experience is,

If I don’t enter the market near the start of a trend,

I will definitely not gain much from this trend.

Because,

I miss out on profit reserves,

And such reserves are essential for courage and patience.

With courage and patience,

He can calmly observe market changes,

And hold his position in the face of small pullbacks or rebounds that inevitably occur before this trend ends.

The market will send signals to you about when to enter,

And equally certain,

It will send signals to you about when to exit—if you patiently wait.

"Rome wasn’t built in a day,"

A truly major trend does not end in a day or a week.

It takes time to complete its logical process.

Many times,

Livermore was a holder of cash, waiting,

Until the right trend appeared.

His many successes lay in his ability to hold cash,

Be patient,

And wait,

Until the "appropriate trend appears before him."

When the trend appears,

And many opportunities favorable to him emerge,

At that moment,

And only at that moment,

He will strike like a cobra,

"Zing" with a sudden rush.

"One key to my later trading theory: trade only at critical points.

As long as I have patience,

And trade at critical points,

I will always make money.

I also believe,

Most of a stock’s movement occurs during the last two weeks or longer of that trend.

The same applies to commodity futures.

So,

I emphasize again,

Speculators must have patience,

Be prepared,

And wait."

The definition of a critical point is: the most appropriate psychological moment to trade.

Livermore never buys at the lowest price,

Nor sells at the highest price. He wants to buy at the right time,

And sell at the right time.

"But remember,

When using critical points to predict the market,

If after crossing the critical point,

The stock does not perform as it should,

That is an important warning signal that requires immediate attention.

As soon as I lose patience,

And do not wait for the critical point to appear,

But make easy money,

I will definitely lose money.

Another point to note: When a trend is nearing its end,

A significant increase in volume often indicates a true distribution,

Because stocks are shifting from strong hands to weak hands,

From professional traders to ordinary investors.

Generally, investors think that a sharp increase in volume is a normal correction,

Either adjusting toward the highest or lowest prices,

And a sign of a lively and healthy market,

But this view is unfounded.

I want to clarify to those who are willing to regard speculation as a serious business,

And I also want to solemnly reaffirm,

Wishful thinking must be eliminated; relying on daily or weekly speculation,

Will not lead to success; you should limit the number of entries,

Maybe only four or five times a year.

Before trading,

Wait,

Be patient,

Until as many factors as possible favor you,

Then make your move.

Patience can make you money.

When the market is in a stalemate,

The stock price is essentially stagnant,

Do not predict or estimate when or in which direction the market will move,

That is very dangerous.

You must wait for the market or stocks to break out.

Don’t estimate! Wait for confirmation from the market! Don’t argue with quotes.

Cash in the past is,

Now is,

And will always be king.

In fact,

"Those who hold cash and wait for the right moment to trade are often the ones who make big money.

Patience,

Patience,

And more patience; not speed,

Is the key to success.

If a shrewd speculator masters this,

Time becomes his best friend.

Master the right timing to enter the market,

Time is not money,

Because sometimes,

Even if you enter the market early,

You may not make money—time is just time,

And capital is capital,

More often, start early,

And wait until the right time to enter the market to make money—patience,

Patience,

And more patience,

Are the keys to success,

Never rush.

Each of us is tempted by a common weakness: wanting to win every trade,

Of course, we want to win every hand.

This is exactly the human weakness we all share,

To some extent,

It is the greatest enemy of investors and speculators,

And if not guarded against,

It will ultimately lead to the downfall of speculation! Sometimes,

People should speculate; equally certain,

Sometimes,

People should not speculate.

Excellent traders are always waiting,

Always patient,

Waiting for the market to confirm their judgment.

Without market confirmation,

Do not predict,

And do not act.

Many times,

Like many other speculators,

I lacked patience to wait for what was bound to happen.

I want to profit every moment,

I am human,

And succumb to human weaknesses.

Like all speculators,

I also lose patience,

And lose correct judgment.

Reversing them—

When you should be afraid, you are full of hope,

When you should be hopeful, you feel fear.

Let me repeat,

When a trend truly appears,

Some opportunities will appear simultaneously,

And I firmly believe,

Anyone with a talent for speculation and patience,

Can develop a special method as their principle,

A method that allows them to make correct judgments at the start of entering the market.

A real trend does not end on the day it begins,

Completing a true trend takes time.

Remember,

Stocks will never be too high,

High enough to prevent you from starting to buy,

Nor too low to prevent you from starting to sell.

But after the first trade,

Unless it yields a profit,

Don’t make a second.

Wait and observe.

This is when your analytical skills come into play,

Allowing you to determine the right moment to start.

Many successes or failures depend on whether you start at the perfect time.

It took me many years to understand the importance of this.

It also cost me hundreds of thousands of dollars.

Correct is correct,

Wrong is wrong,

Only do what is correct,

And don’t compound mistakes!

A highly talented speculator once told me: "When I see a warning signal,

I don’t argue with it.

I step aside! A few days later,

If everything still looks good,

I come back.

Here’s what I think,

If I am walking along the railway tracks,

And see a train rushing toward me at 60 miles per hour,

I will jump off the tracks to let the train pass,

And not foolishly stand there unmoving.

After it passes,

As long as I want,

I can always get back on the tracks."

This vividly illustrates a kind of speculative wisdom,

And I have never forgotten it.

Strangely,

Most traders’ trouble is,

Some inner part of them prevents them from having enough courage to close their positions when they should.

They hesitate,

And in hesitation, they watch the market move many points against them.

Obviously,

What should be done is to be bullish in a bull market,

And bearish in a bear market.

Sounds funny,

Right? But I must deeply understand this general principle,

Before I can see how to implement it.

It took me a long time,

To learn to trade according to these principles.

Analysis is an important part of this game,

Starting at the right time is equally important,

And sticking to your position is just as important.

But my greatest discovery is that a person must study and evaluate the overall situation,

To predict the potential.

I no longer gamble blindly,

No longer care about mastering operational skills,

But focus on diligent research and clear thinking,

To win my own success.

I also found that no one can avoid the danger of foolish operations.

Foolish operation by a person,

Will cost him dearly.

The market encompasses and digests everything,

It is always right,

Following the market is the wisest!

My theory is: "Behind these major trends,

There is always an irresistible force."

Knowing this is enough,

Being overly curious about all reasons behind price movements,

Is not a good thing.

Just recognize where the trend appears,

Go with the flow of the tide in your speculation boat,

And you can benefit from it,

Don’t argue with the market,

Most importantly,

Don’t try to outsmart the market.

The public should always remember the elements of stock trading.

When a stock rises,

There’s no need to spend energy explaining why it rises.

Continuous buying will keep the stock price rising.

As long as the stock price continues to rise,

Occasional natural small pullbacks,

Follow the trend,

Are generally quite safe.

However,

If after a long period of steady rise,

The price begins to gradually decline,

And only occasionally rebounds,

It’s clear that the least resistance route has shifted from upward to downward.

That’s how it is,

Why seek explanations? Price declines often have good reasons,

But,

Few people know these reasons,

They either keep the reasons secret,

Or tell the public that the stock is cheap.

That’s the essence of this game,

The public should understand,

That few insiders will tell the truth.

The simple fact is,

Market changes always happen first,

Before economic news,

Markets do not react to economic news.

Markets are alive,

They reflect the future.

Therefore,

It is very foolish to try to predict the stock market based on current economic news and events.

Greed and fear,

Both distort rationality.

The stock market only speaks of facts,

Only of reality,

Only of rationality,

The stock market is never wrong,

The trader is.

Losses are the cost of trading,

Failure is not scary,

What’s scary is not learning enough from failure!

No matter how experienced a trader is,

The possibility of making mistakes and losing trades always exists.

Because speculation can never be 100% safe.

The so-called experience is more lessons learned,

More profound,

Painful,

Embarrassing; without pain,

You won’t remember,

Without pain,

You won’t reflect.

That’s how it is.

It’s normal for a person to make mistakes,

But if he cannot learn from mistakes,

Then he is truly unlucky.

There’s nothing in the world,

More instructive than losing everything.

When you realize what not to do to avoid losing money,

You begin to learn what to do to make money.

If someone tells me,

That my method doesn’t work,

I will still try it thoroughly,

Just to confirm it.

Because when I am wrong,

Only one thing—losing money—can make me believe I am wrong.

I know that one day I will find where I went wrong,

And stop making mistakes.

Only when I make money,

Am I truly right,

That’s speculation.

It takes a long time for a person,

To learn all the lessons from all his mistakes.

Some say everything has two sides,

But the stock market has only one side,

Not the bull side or the bear side,

But the right side.

Let this rule be deeply ingrained in my mind,

The time spent,

Far exceeds most of the technical aspects in stock speculation.

Losing money is the least troubling thing for me.

Once I admit my loss,

Losses never trouble me.

The next day, I forget about it.

But mistakes—failing to admit loss—are the things that hurt the pocket and the soul.

If a person never makes mistakes,

He would own the whole world within a month.

But if he cannot benefit from mistakes,

He absolutely cannot own anything good.

Trading is a contest between reason and emotion! Trading requires rational planning.

I realized long ago,

The stock market has never been dull.

It is designed to fool most people,

Most of the time.

The two main emotions in the stock market,

Hope and fear,

Hope often arises from greed.

And fear often arises from ignorance.

I believe,

Losing control of your emotions is the true enemy of the speculator,

Hope,

Fear, and greed always exist,

They hide in our hearts,

They wait outside the market,

Waiting to jump in and perform,

Waiting for the opportunity to make a big profit.

Hope is vital for human survival.

But hope is the cousin of ignorance,

Greed,

Fear, and distorted reason in the stock market.

Hope masks the facts,

And the stock market only recognizes facts.

The outcome is objective,

And final,

Just like nature,

Unchangeable.

Additionally,

Always remember,

You can win a race,

But you cannot win all races.

You can make money on one stock,

But you will never always make money on Wall Street—nobody can.

Greed,

Fear,

Lack of patience,

Ignorance, and hope,

All these will exhaust the speculator.

After several failures and disasters,

Investors may become discouraged,

Depressed,

Disillusioned,

Give up the market,

And give up the opportunities to make money it offers.

The biggest problem a speculator must control is his emotions.

Remember,

What drives the stock market is not reason,

Not logic, nor pure economic factors,

But human nature that never changes.

It does not change,

Because it is our nature.

The main enemy of the speculator always comes from within.

Human nature cannot be separated from hope and fear.

In speculation,

If the market diverges from you,

You hope every day is the last day—and if you do not follow hope,

You will lose more than you should—

Strong enough to rival the great heroes who have opened up lands and made conquests.

When the market moves in your favor,

You fear that tomorrow will take away all your profits,

So you exit—too quickly.

Fear prevents you from earning as much as you should.

Successful traders must overcome these two deep-rooted instincts.

They must change what can be called innate impulses.

When they hold hope,

They should actually be afraid,

And when they are afraid,

They should hold hope.

They must fear that their losses could turn into bigger losses,

And hope that their profits could turn into bigger gains.

Betting on stocks like an ordinary person,

Is absolutely wrong.

Remember,

If an investor lacks self-discipline,

And does not have a clear strategy,

And a simple, easy plan,

He will fall into emotional traps.

Because a speculator without a plan is like a general without a strategy,

And without a feasible battle plan.

A speculator without a clear plan can only speculate,

Speculate,

And speculate again,

Until one day, unfortunately, he "gets shot down,"

And suffers a complete failure in the stock market.

In fact,

Among all businessmen,

No one has a plan for handling the most important matters.

It’s like a general on the battlefield,

His soldiers’ lives depend on his meticulous plan,

And on the execution of that plan,

In the stock market,

There is no room for mistakes or negligence.

Control your trades,

Manage your funds.

Unless you know that your trades are financially safe,

Never make any trade.

"Unexperienced speculators often face the dilemma of risking too much on each position.

Why? Because everyone wants to trade.

Paying too much for each trade,

Is against human nature.

People want to buy at the lowest price,

And sell at the highest.

Maintain a calm mindset,

Don’t argue with facts,

Don’t hold hope when there is none,

Don’t argue with the quote machine,

Because the quote machine is always right—in speculation, there are no hopes,

No guesses,

No fears,

No greed,

No emotions."

Finally,

A speculator should buy stocks in several installments,

And only buy a certain proportion each time.

If I buy a stock I like under certain conditions,

But it does not perform as I hope,

That is enough reason for me to sell that stock,

And if it later rises,

I do not blame myself,

Nor do I feel any pain.

In my later practical operations, I developed my own theory,

This theory emphasizes the importance of capital time in stock trading.

When a speculator manages his funds,

That "always wanting to win" desire is his greatest enemy,

And it will ultimately lead to disaster.

In the stock market,

Time is not money,

Time is just time,

And money is just money.

I proposed my 10% rule—if I lose more than 10% on a trade,

I immediately exit.

I never ask why,

If the stock price falls,

That’s my reason to withdraw.

I act instinctively,

But actually,

It’s not instinct,

It’s subconscious accumulated over years of fighting in the stock market.

You must obey your own rules...... don’t deceive yourself,

Don’t procrastinate,

Don’t wait! My basic principle is,

Never let losses exceed 10% of your capital.

The greatest enemy of an investor is not the market,

Not others,

But himself,

Big swings can make you big money!

Let me tell you one thing: after many years on Wall Street,

Earning millions of dollars,

And losing millions of dollars,

I want to tell you this: my ideas have never made me big money,

It’s always my persistence that makes me big money,

Understand? It’s my persistence! Correct market judgment is not surprising.

You will always find many who initially go long in a bull market,

And many who initially go short in a bear market.

I know many who judge correctly at the right time,

And start buying or selling,

At the very price where the greatest profit should appear.

Their experience is exactly like mine—that is,

They did not truly profit from it.

Those who can judge correctly and stick to it are rare,

And I find this to be the hardest thing to learn.

But only after a trader truly understands this,

Can he make big money.

This is absolutely true,

Once a trader knows how to operate,

It’s easier to make millions than to make hundreds when he knows nothing.

Because,

A person may see clearly and distinctly,

But when the market moves smoothly,

And he is prepared to go in the direction he believes it will,

He becomes impatient or doubtful.

Wall Street has so many fundamentally not fools,

Even those not in the third level of fools,

And they all lose money,

The reason is here.

The market has not defeated them.

They defeated themselves,

Because although they have brains,

They cannot stick to their positions.

I began to realize that to make big money,

You must profit from big swings.

No matter what causes the big swings to start,

The fact remains,

Big swings can continue,

Not caused by insider groups or financiers’ tricks,

But based on fundamental conditions.

No matter who opposes,

Big swings will follow the driving forces behind them,

And push rapidly to the end.

Ignoring big swings,

Trying to jump in and out,

Is a deadly disease for me.

No one can catch all the ups and downs,

In a bull market,

Your approach is to buy and hold,

Until you believe the bull market is about to end.

To do this,

You must study the overall trend,

Not just the obvious or special factors affecting individual stocks,

And then you must forget all your stocks,

Forever forget! Until you see—or as you like to say,

Until you think you see—the market reversing,

And the overall trend beginning to reverse.

To do this,

You must use your own mind and vision,

Otherwise, my advice will tell you that buying low and selling high is just as foolish.

The most helpful thing anyone can learn,

Is to give up trying to catch the last or the first stock.

These two are the most expensive things in the world.

All in all,

These two have cost stock investors hundreds of millions of dollars,

More than enough to build a cement highway across the Americas.

A person who lacks confidence in his judgment,

Cannot go far in this game.

These are probably all I have learned—studying the overall situation,

Holding positions,

And sticking to them.

I can wait patiently without impatience,

Can see a decline coming,

And remain unmoved,

Knowing it’s only temporary.

I once sold 100,000 shares,

Seeing a major rebound coming.

I correctly identified—accurately—that this rebound was inevitable,

Even healthy,

And would make a difference of 1 million dollars in my account profit.

I remained as steady as Mount Tai,

Watching half of my paper profit wash away,

Without considering re-entering or shorting on rebounds.

I know that if I do that,

I might lose my position,

And miss the big opportunity to make money,

Big swings are what make you big money.

Speculation is a game,

And also your own career,

Requiring continuous effort,

Dedication, and reflection.

I am seeking a bigger game than entertainment and socializing.

I want to become the best in the stock market through my own efforts—this gives me real joy and satisfaction.

Stock trading is actually a game,

And you must win this game.

Good stock traders cannot be like well-trained professional athletes,

They must develop good living habits,

Maintain high energy levels,

If they want to keep their vitality at peak.

Physical strength and energy must be consistent,

Because there is no battlefield more tense,

More exciting than the stock market.

It is not money that drives me,

It is a game,

A game of solving riddles,

A game of messing up and complicating the greatest minds in human history.

For me,

Passion,

Challenge,

Excitement,

Are all about winning this game,

This game is a vibrant puzzle,

A riddle with double entendres,

And the answer is for me to tell all men and women speculating on Wall Street.

In this game,

Your nerves are pushed to the limit,

But the rewards are also very high.

My career is trading—that is, following the facts in front of you,

Not following what you think others will do.

Let me remind you: Your success will be proportional to the sincerity and loyalty you show in your efforts,

This effort includes keeping your own market records,

Thinking independently, and drawing your own conclusions.

If a person wants to make a living from this game (speculation),

He must believe in himself and his judgment.

No one can make big money just by others telling him what to do.

The stock market is the greatest and most complex puzzle invented by mankind,

The one who solves this puzzle deserves the top prize.

It takes a long time for a person,

To learn all the lessons from all his mistakes.

Some say everything has two sides,

But the stock market has only one side,

Not the bull side or the bear side,

But the right side.

Let this rule be deeply ingrained in my mind,

The time spent,

Far exceeds most of the technical aspects in stock speculation.

There is only one way to succeed in speculation,

And that is effort,

Effort,

And more effort.