Jesse Livermore

Jesse Livermore- "When you know what not to do in order not to lose money, you begin to learn what to do in order to win."

A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss, that is what does damage to the pocket book and to the soul.

A prudent speculator never argues with the tape. Markets are never wrong – opinions often are.

Successful traders always follow the line of least resistance. Always follow the trend.  The trend is your friend.

The say there are two sides to everything. But there is one side to the stock market; and it is not the bull side ore the bear side, but the right side.

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.

Speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I have never forgotten that.

There is a time to go long. There is a time to go short. And there is a time to go fishing.

When you know what not to do in order not to lose money, you begin to learn what to do in order to win.

If a man didn’t make mistakes he’d own the world in a month. But if he didn’t profit by his mistakes he wouldn’t own a blessed thing.

As far as I am concerned it is a full-time job – perhaps even more than a job. Perhaps it is a vocation, where many are called but few are singled out for success.

Instead of leaving for home the moment I was through with my work, I’d jot down the figures I wanted and would study the changes, always looking for the repetitions and parallelisms of behaviour – learning to read the tape, although I was not aware of it at the time.

I believe that the public wants to be lead, to be instructed, to be told what to do. They want reassurance. They will always move en masse, a mob, a herd, a group, because people want the safety of human company. They are afraid to stand alone because the pressure is to be safely included in the herd, not to be the lone calf standing on the desolate, dangerous wolf-patrolled prairie of contrary opinion.

I know something was wrong but I couldn’t spot it exactly. But if something was coming and I didn’t know where from, I couldn’t be on my guard against it. That being the case I’d better be out of the market.

Reasonable people act unreasonably when they are afraid. And people become afraid when they start to lose money, their judgement becomes impaired. This is our human nature in this stage of evolution. It cannot be denied. It must be understood.

But I can tell you after the market began to go my way I felt for the first time in my life that I had allies; the strongest and truest in the world; underlying conditions.

You can spot where the buying is only a trifle better than the selling. A battle goes on in the market and the tape is your telescope. You can trust it seven out of ten cases.

There is a plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade at all times. No man can always have adequate reasons for buying or selling stocks!

I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game; that is to play the market only when I was satisfied precedents favoured my play.

The loss of money didn’t bother me. Whenever I have lost money in the stock market I have always considered that I have learned something, that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.

There is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. I didn’t ask the tape why when I was fourteen and I don’t ask it today at forty.

People who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this earth.

I kept business to myself. Prices either were going the way I doped them out, without any help from friends or partners or they were going the other way and nobody could stop them out of kindness to me.

Your business with the tape is now – not tomorrow. The reason can wait. But you must act instantly or be left.

A man must believe in himself and his judgement if he expects to make a living of this game.

The only time I really ever lost money was when I broke my own rules.

I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.

I thought the insiders would naturally do what I would have done had I been in their place. But that was something I had no business to think because my business is to trade – that is, to stick to the facts before me and not to what I think other people ought to do.

Whatever happens in the stock market today has happened before and will happen again.

Wall Street professionals know that acting on “inside” tips will break a man more quickly than famine, pestilence, crop failures, political readjustments or what might be called normal accidents. There is no asphalt boulevard to success in Wall Street or anywhere else.

In a bull market the trend of prices, of course, is decidedly and definitely upward. Therefore whenever a stock goes against the general trend you are justified in assuming that there is something wrong with that particular stock. It is enough for the experienced trader to perceive that something is wrong. His job is not to listen for it to say. “Get out”.

Suppose a man’s line is five hundred shares of stock. I say that he ought not to buy it all at once; not if he is speculating. If he is merely gambling the only advice I have to give to him is, don’t.

Suppose he buys his first hundred, and that promptly shows him a loss. Why should he get to work and get more stock? He ought to see at once that he is wrong: at least temporarily.

You know, a professional gambler is not looking for long shots, but for sure money. Of course, long shots are fine when they come in.

And there is another thing to remember and that is that a market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break. My warning came when, one after another, those stocks which had been the leaders of the market reacted several points from the top and- for the first time in many months- did not come back.

That is one trouble about trading on a large scale. You cannot sneak out as you can when you pike along. You cannot always sell when you wish or when you think it is wise. You have to get out when you can: when you have a market that will absorb your entire line. You cannot hesitate!

I knew that unless I had sufficient trading capital I would not be able to use good judgement. Without adequate margins it would be impossible to take the cold-blooded, dispassionate attitude toward the game that comes from the ability to afford a few minor losses such as I often incurred in testing the market before putting down the big bet.

It has always seemed to me the height of damned foolishness to trade on tips. I suppose I am not built the way a tip-maker is. I sometimes think that tip takers are like drunkards. There are some who can’t resist the craving and always look forward to those jags which they consider indispensable to their happiness. It is easy to open your ears and let the tip in.

There isn’t a man in Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motorboat or a painting. I could build a huge hospital with the birthday presents that the tight fisted stock market has refused to pay for. In fact, of all hoodoos in Wall Street I think the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent.

I play a lone hand by choice and also because it is the wisest and cheapest way to trade. I get my pleasure by matching my brains against the brains of other traders – men whom I have never seen and never talked to and never advised to buy or sell and never expect to meet or know. When I make money I make it backing my own opinions. I don’t sell them or capitalize them. If I made money in any other way I would imagine I had not earned it.

It was not that all I needed to learn was not to take tips but to follow my own inclination. It was that I gained confidence in myself and I was able to finally shake off the old method of trading. From then on I began to think of basic conditions instead of individual stocks. I promoted myself to a higher grade in the hard school of speculation. It was a long and difficult step to take.

He would buy one hundred shares of some active stock and when, or if, it went up 1% he would buy another hundred. On another points advance another hundred and so on. He would put in a stop-loss order one point below the price of his last purchase. When the price kept going up he simply moved up his stop with it.

A man must give his entire mind to his business if he wishes to succeed in stock speculation.

Old baron Rothschild’s recipe for wealth winning applies with greater force than ever to speculation: “I have found an easy way and I stick to it. I never buy at the bottom and I always sell too soon.”

Of course I had been reading the daily dope regularly for a long time. All traders do. But much of it was gossip, some of it deliberately false and the rest merely the personal opinion of the writers. The reputable weekly reviews when they touched upon underlying conditions were not entirely satisfactory to me. The point of view of the financial editors was not mine as a rule.

He believed in asking his own questions and in doing his seeing with his own eyes. He had no use for another man’s spectacles.

A man may beat a stock or a group at a certain time, but no man living can beat the stock market.

Whenever a newspaperman or an acquaintance asks my opinion of a stock and I have one I do not hesitate to express it. At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape.

Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was. Weapons change, but strategy remains strategy, on the New York Stock Exchange as on the battlefield.

When I had a profit of at least four points in each and every of the twelve stocks that I was short of, I knew that I was right. The tape told me it was now safe to be bearish so I promptly doubled up. I had my position.

Regardless of experience; speculation can never be made 100 percent safe.

Difficult, as profitable stock speculation has always been, is becoming even more difficult every day. Today, a man is trading in everything; almost every industry in the world is represented. It requires more time and more work to keep posted and to that extent stock speculation has become much more difficult for those who operate intelligently.

I am profoundly interested in all phases of my business, and of course I learn from the experience of others as well as from my own. There is profit in studying the human factors – the ease with which human beings believe what it pleases them to believe; and how they allow themselves – indeed, urge themselves- to be influenced by their cupidity or by the dollar-cost of the average man’s carelessness.

I had learned a great deal about the game of stock speculation, but I had not learned quite so much about the play of human weakness. There is no mind so machinelike that you can depend on it to function with equal efficiency at all times. I now learned that I could not trust myself to remain equally unaffected by men and misfortunes at all times. A man must know himself thoroughly if he is going to make a good job out of trading in the speculative markets.

The reputable newspapers always try to print explanations for market movements. It is news. Their readers demand to know not only what happens in the stock market but why it happens. At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape.

Another thing to bear in mind is this: never try to sell at the top. It isn’t wise. Sell after a reaction if there is no rally.

Without adequate margins it would be impossible to take the cold-blooded, dispassionate attitude toward the game that comes from the ability to afford a few minor losses such as I often incurred in testing the market before putting down the big bet.

I should say that in ninety-nine cases out of a hundred, so-called raids are really legitimate declines, accelerated at times but not primarily caused by the operations of a professional trader.

It was improper and unwise for me as a speculator to act against my own judgement. Business is business always and my business as a speculator is to back my own judgement always.

Activity is all that the floor traders ask. They will buy or sell any stock at any level if only there is a free market for it. They will deal in thousands of shares wherever they see activity and their aggregate capacity is considerable. To get a professional following, I myself have never had to do more than to make a stock active. Traders don’t ask for more.

By sticking to the position that I felt was right I made over a million dollars. Knowledge is power and power need not fear lies – not even when the tape prints them.

I have done nothing in my life than to trade in stocks and commodities. I naturally think that if it is wrong to be bearish it must be right to be a bull. And if it is right to be a bull it is imperative to buy.

As a matter of fact I trade in accordance to my means and always leave myself an ample margin of safety. I could see the profit coming – fast. There wasn’t any cleverness about it. It was simply that I wasn’t blind.

One after the other of the fellows tied to coax the market to pay for that fur coat. One day I said I would buy it to keep the office from going broke. What does a man do when he sets out to make the stock market pay for a sudden need? Why, he merely hopes. He gambles.

I could sell any amount of stock in that market; and of course, when a man is carrying his full line of stocks, he must be on the watch for an opportunity to change his paper profits into actual cash. He should try to lose as little of the profit as possible in the swapping. Experience has taught me that a man can always find an opportunity to make his profits real and that this opportunity usually comes at the end of the move.

A man was going to fight a duel. His second asked him: “Are you a good shot?” “Well”, said the duellist, “I can snap the stem of the wineglass at twenty paces”. “That’s all very well”, said the unimpressed second. “But can you snap the stem of the wineglass while the wineglass is pointing a loaded pistol straight at your heart?”

I wasn’t thinking about anything except that I was right – 100% right- and that this was a heaven-sent opportunity. It was up to me to take advantage of it. I sold more.

The best time to buy is when blood is running in the streets.

The subconscious mind probably went on working, reaching conclusions for me. The decision to sell was the result of my observation. My years of experience in trading told me that the line of least resistance had changed from up to down. My trading mind concerns itself with trading problems and I think I am justified in asserting that I made up my first loss because I had the experience and the memory.

I’ve known men to lose thousands of dollars on such bets, particularly on purchases made at the height of a bull market just before a moderate reaction. It certainly is no way to trade. I persisted in thinking that the stock market must perforce make money for me in the end. But the only end in sight was the end of my resources. I not only got in debt, but I stayed in debt from then on.

I was on my way to a bigger fortune than I had lost and walking pretty fast. For three weeks my average profit was 150 percent per week. From then on my trading would be on a steadily increasing scale. But making or not making the money was not bothering me much. What made me happy was that I was losing the habit of being wrong, of not being myself. It had played havoc with me for months but I had learned my lesson.

In addition to trying to determine how to make money one must also try to keep from losing money. It is almost as important to know what not to do as to know what should be done. It is therefore well to remember that manipulation of some sort enters into practically all advances in individual stocks and that such advances are engineered by insiders with one object in view and one only and that is to sell at the best profit possible.

A stock speculator sometimes makes mistakes and knows that he is making them. And after he makes them he will ask himself why he made them; and after thinking of it cold-bloodedly a long time after the pain of punishment is over he may learn how he came to make them, and when, and at what particular point of his trade; but not why. And then he simply calls himself names and lets it go at that.

I took in my 30 000 shares at practically the lowest prices of the movement. But I wasn’t thinking of covering at the bottom. I was intent on turning my paper profits into cash without losing much of the profit in the changing. I stood pat throughout because I knew my position was sound. I wasn’t bucking the trend of the market or going against basic conditions but the reverse and that was what made me so sure of the failure of an overconfident inside-clique. What they tried to do others had tried before and it had always failed.

The public did not buy any more of the new stock, because the entire market developed reactionary tendencies. The insiders got cold feet and did not support the stock; and if insiders don’t buy their own stock on recessions, who should? The absence of inside support is usually accepted as a pretty good bear tip.

In booms, which is when the public is in the market in the greatest number, there is never any need of subtlety, so there is no sense of wasting time discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by the cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for he privilege of proving conclusively that it cannot be found on this sordid earth.

But I was sure to read in the newspapers that very day or the next about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.

I think I told you before that I have managed to escape squeezed more than once, not because of the possession of a mysterious ticker-sense but because I can generally tell the moment the character of buying in the stock makes it imprudent for me to be short of it.

He was head and shoulders above all other manipulators past and present. Even at this distance I can see that he had an amazing knack for adapting himself to new conditions, and that is valuable in a trader. He varied his methods of attack and defence without a pang because he was more concerned with the manipulations of properties rather than stock speculation.

He was always hard up because he always needed twenty or thirty millions more than the bankers were willing to lend him. Visions without money mean heartaches; with money it means achievement; and that means power; and that means money; and that means achievement; and so on, over and over an over.

The reason that had made me cover at a great loss was no longer a good reason since there had not been the usual prompt and vigorous rally. So I sold 10 000 bales and waited. When I saw there was no rally, I sold 10 000 more.

I myself never cared much for money. I never thought enough of it to consider it worth lying for it. But I knew that everybody didn’t feel that way. Of  course,  I also knew that if I got on my feet again I’d pay everybody off, for the obligation remained.

I trade in accordance to my means and always leave myself an ample margin of safety. I had now waited for a year but I was now going to be paid for both my waiting and for being right.

He appears sincere in all things, and as for plausibility, he hasn’t an equal. I have heard many people accuse Percy Thomas of many things, including insincerity, but I sometimes wonder if his remarkable plausibility, does not come from the fact that he first convinces himself so thoroughly as to acquire thereby a greatly increased power to convince others.

To learn that a man can make foolish plays for no reason whatever was a valuable lesson. It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant man.

I might have learned my lesson quite as well if the cost had only been one million. But fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be.

I had been a millionaire rather less than a year. My millions I had made by using brains, helped by luck. I had lost them by reversing the process. So I sold out my two yachts and was decidedly less extravagant in my manner of living.

I am never afraid or impatient when I am sure of my position. But the market didn’t act the way it should act had I been right. Having taken the first wrong step I took the second and the third and of course it muddled me all up. Not only did I not take my stop, but I held up the entire market.

I didn’t want to take it out of the balance I kept at my brokers’ because if I did I wouldn’t have much of a margin left for my own trading; and I needed trading facilities more than ever If I was to win back my millions quickly. There was only one alternative and that was to take out of the stock market.

Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was.

An investor looks for safety, for permanence of the interest return on the capital he invests. The speculator looks for a quick profit.

I sometimes think that speculation must be an unnatural sort of business, because I find that the average speculator has arrayed against his own nature.

If you begin right you will not see your profitable position seriously menaced; and then you will find no trouble in sitting tight.

Being broke is the best educational agency there is.

The principles of successful stock speculation are based on the supposition that people will continue in the future to make the same mistakes that they have made in the past.

I learned this all so slowly because I learned by my mistakes and some time always elapses between making a mistake and realizing it, and more time between realizing it and exactly determining it.

That is about all I have learned – to study general conditions, to take a position and stick to it.

I paid a high price for my experience and I don’t intend to throw away a second tuition fee.

The big money is not in the individual fluctuations but in the main movements – that is, not in reading the tape but in sizing up the entire market and its trend.

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn.

Three to thirty weeks is the usual Wall Street life of a first time offender.

It took me five years to learn to play the game intelligently enough to make big money when I was right.

At the broker’s office the average customer was never long-lived, financially speaking. It was a sound theory. A busted customer can’t trade. A half-crippled customer can whine and insinuate things and make trouble of one or another kind that hurts business.

I always trade in accordance to my means and always leave myself an ample margin of safety. Always.

I never took any tips. I was attracted to activity and I was known to swing a pretty fair line.

I was rarely guessing. Rather, I was expecting the inevitable.

“Not this trip”, I said. But I wasn’t any cocky about it. The tape was clear. Well, actually there wasn’t any ticker there so there wasn’t any tape. But they all knew what I meant.

I rarely buy stocks cheap. I always try to buy effectively – in such a way as to help my side of the market.

A bull market tends to bail you out of all your mistakes. Conversely, bear markets makes you PAY for your mistakes.

Courage in a speculator is merely confidence to act on the decision of his mind. With me, I cannot fear to be wrong because I never think that I am wrong until I am proven wrong.

But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing.

I admit that I do get irresistible impulses at times to do certain things in the markets. I must get out. I am uncomfortable until I do. I myself think that what happens is that I see a lot of warning signals.

In investing, the return you want should depend on whether you want to eat well or sleep well.

Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.

I never buy a stock even in a bull market, if it doesn’t act as it ought to act in that kind of market. I have sometimes bought a stock during an undoubted bull market and found out that other stocks in the same group were not acting bullish and I have sold out my stock.

The professional concerns himself with doing the right thing rather than with making money, knowing that the profits take care of themselves if the other things are attended to.

A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weakness.

The belief in miracles that all men cherish is born of immoderate indulgence in hope. There are people who go on hope periodically and we all know the chronic hope drunkard that is held up before us as an exemplary optimist. Tip takers are all they really are.

If insiders don’t buy their own stocks on recessions, who should? The absence of inside support is generally accepted as a pretty good bear tip.

A man cannot be convinced against his own convictions but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.

After I paid off my debts in full I put a pretty fair amount into annuities. I made up my mind I wasn’t going to be strapped and uncomfortable and minus a stake ever again.

Big money is made in the stock market by being on the right side of major moves. I don’t believe in swimming against the tide.

In advances as well as declines stock markets are apt to show certain recurring habits.

In a bull market and particularly in booms the public at first makes money which it later loses simply by overstaying the bull market.

When there is a raid that is unjustified short selling – there is usually apt to be inside buying.

His tactical needs were directed by his needs and by the minor currents that changed from day to day. In the stock market, as in warfare, it is well to keep in mind the difference between strategy and tactics.

I had a lot of long years of successes, tempered by mistakes that really served the way to pave the way to greater successes.

If you don’t know who you are, the stock market is an expensive place to find out.

The worse a situation becomes, the less it takes to turn it around, the bigger the upside.

It isn’t as important to buy as cheap as possible as it is to buy at the right time.

There have been three great inventions since the beginning of time: fire, the wheel and central banking.

In a bear market everyone loses And the winner is the one who loses the least.

If you don’t profit from your investment mistakes, someone else will.

Institutions tend to dump stocks in a single transaction and buy, if possible, in smaller lots, gradually accumulating a position. Therefore, many more big blocks are trade on downticks than on up ticks.

The finest art is not to lose money. Making money in the stock market can be done by anybody.

A loss never bothers me after I take it. I forget over night. But being wrong – not taking the loss – that is what does damage to the pocketbook and to the soul.