Jesse Livermore is regarded as one of the best traders of all time. He has been featured in many books and is widely read by new and experienced traders. Edwin Lefevre’s Reminiscences of a Stock Operator published in 1923 is the most read book on Livermore. In fact, traders nowadays turn to Livermore for stock market trading plan.
Livermore had a series of ups and downs in his whole trading career. He made and lost millions. He shared every lesson he learned with fellow traders and the trading community benefitted from these decades after his death. It only comes to show that the rules and lessons he shared can still be applied in the twenty-first century. In fact, his advice has become stock market trading rules that traders follow.
1. Cut losses quickly
This is one of the biggest mistakes traders make – they do not know when to stop trading. They let greed take over and they continue trading just because they earned more profits. Only when they start losing do they wish that they stopped when they had the chance.
When the market slides, the trader must rationalize his position and check whether he could win or lose. If he just held on, then he is vulnerable. The easiest way, and safest way for that matter, is to just stop when one’s ahead. Stock market trading results will be better once they know when to leave while the going is still right.
2. Always be sure before going all in
Observe the stock that you want to invest in. Check the decision where it’s going. If you can maximize the returns, do so. If you hold on to it too long, you will lose. If you hold out for too long as well, you lose too. This is a smart stock market trading strategy.
Livermore found a remedy to this by taking small lines at first and then adding more when the trading strategies prove to be correct. There are various ways to buy in positions that will work to the trader’s favor. He just has to determine the specific points for his entrance as well as his exit to make sense of his stock market trading plan.
3. Use pivot points to determine trends
During his time, Livermore called these pivot points. Nowadays, it’s referred to as swing highs and swing lows. When going long, traders look for confirmation and they do this by assessing how strong the move is. Higher lows and higher highs are the strongest indicators of where the trends go. These are very integral and serve as the resistance lines and support for traders to work on their momentum or change it.
Livermore killed himself. No one knows why. But traders continue to remember him as one of the best and they do what he did so that they too can succeed. The stock market trading strategy he has set may even work to the favor of the other traders.