Introduction of the character of our story
This is what Investopedia says about Jesse Livermore:
"Born in 1877, Jesse Livermore is one of the greatest traders that few people know about.
Livermore, who is the author of How to Trade in Stocks (1940), was one of the greatest traders of all time. At his peak in 1929, Jesse Livermore was worth $100 million, which in today's dollars roughly equates to $1.5 billion. Depending on how you measure it, his fortune peaked between 1.1 and 14.0 billion dollars in today’s money.
The enormity of his success becomes even more staggering when considering that he traded on his own, using his own funds, his own system, and not trading anyone else's capital in conjunction."
Time Magazine once described Jesse Livermore as the most fabulous living U.S. stock trader. His progress from office boy to Wall Street legend – his trading lessons – his triumphs and disasters – is probably the most fascinating of any of Wall Street’s stories.
1) Jesse Livermore on How to Deal with Losses
"There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!"
2) Do not enter the futile game of fortune-telling. Learn to read the market's signals instead.
"Not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions."
3) To Save or to Spend?
"The more I made the more I spent. This is the usual experience with most men.
No, not necessarily with easy-money pickers, but with every human being who is not a slave of the hoarding instinct.
Some men, like old Russell Sage, have the money-making and the money-hoarding instinct equally well developed, and of course, they die disgustingly rich."
4) Jesse Livermore on Improving your Investment Strategy
"Before I can solve a problem I must state it to myself. When I think I have found the solution I must prove I am right. I know of only one way to prove it; and that is, with my own money."
5) Jesse Livermore on setting a target
"I often took profits and waited for a reaction that never came. And I saw my stock go kiting up ten points more and I sitting there with my four-point profit safe in my conservative pocket.
They say you never grow poor taking profits. No, you don't. But neither do you grow rich taking a four-point profit in a bull market."
6) Jesse Livermore on the Level of Investors
"Suckers differ among themselves according to the degree of experience. The tyro knows nothing, and everybody, including himself, knows it.
But the next, or the second grade thinks he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied not the market itself but a few remarks about the market made by a still higher grade of suckers. The second-grade sucker knows how to keep from losing his money in some of the ways that get the raw beginner.
It is this semi-sucker rather than the 100% beginner who is the real all-the-year-round support of the commission houses. He lasts about three and a half years on average. It is he who is always quoting the famous trading aphorisms and the various rules of the game.
He knows all the don'ts that ever fell from the oracular lips of the old stagers excepting the principal one, which is: Don't be a sucker!"
7) Jesse Livermore on Holding Tight
"A man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do.
That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight."
8) Jesse Livermore on bull markets
"Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market, your game is to buy and hold until you believe that the bull market is near its end."