Livermore Quotes—Trading Truths

Jesse Livermore is perhaps the most quoted trader in stock market history.

BUYING
Do not buy a stock because it has had a big decline from its previous high.
It may surprise many to know that in my method of trading, when I
see by my records that an upward trend is in progress, I become a buyer
as soon as a stock makes a new high on its movement, after having had a normal reaction.
I never buy on reactions or go short on rallies.
Each succeeding purchase must be at a “higher price” than the previous one.
When your chosen stock reaches the point you had previously decided
it should reach if the move is going to start in earnest, that is the
time to make your first commitment. So it is plain to see why your friend, the industrialist on the inside, can easily tell you when to buy. But he cannot and will not tell you when to
sell. That would be equivalent almost to treason to his associates.

LOSSES
Traders often hesitate as a stock declines, and during that period of hesitation they watch the market go many points against them.
Profits always take care of themselves, but losses never do.
The speculator has to insure himself against considerable losses by
taking the first small loss.
It would be simple to run down the list of hundreds of stocks, which,
in my time, have been considered gilt-edge investments, and which today are worth little or nothing.
Thus, great investments tumble, and with them the fortunes of so called conservative investors in the continuous distribution of wealth.
I believe it is a safe statement that the money lost by speculation
alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
A good trader will, by acting promptly, hold his losses to a minimum
and await a more favorable opportunity to reenter the market.
It is foolhardy to make a second trade, if your first trade shows you
a loss.
“Never average losses.” Let that thought be written indelibly upon
your mind.

But it is not necessary to lose your money, once you have acquired it,
if you will hold fast to sound principles.
Every time I lost patience and failed to await the Pivotal Points and
fiddled around for some easy profits in the meantime, I would lose money.
My loss was due wholly to lack of patience in awaiting the proper time to back up a pre-conceived opinion and plan.
The market will tell the speculator when he is wrong, because he is
losing money.
When a trader first realizes he is wrong, that is the time to clear out,
take his losses, study the record to determine the cause of the error, and wait the next big opportunity.

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