Words of essence from Jesse Livermore

I am finally passed the half-way mark of slowly clawing back my realized 4-digit loss from trading the US market late last year. Slowly... cos I chewed like a rabbit with no gut to swoop like an eagle. 

Considering that it is only May now, I am hopeful that by end of this year I can at least break even. As the saying goes - "You don't have to win back the same way as you have lost.", I take it that it means winning back via a different trading strategy... Not get out of the game entirely.

Trading is a totally different ball game from investing. In investing, we want the stock (which pays good yield) to be as stable as possible (low beta). Whereas in trading, we want volatility (like now) so we could reap profits via long or short. It's like riding a sight-seeing train versus riding a roller-coaster.

Only with skin in the game, I came to fully appreciate the beauty of JL's 8 principles as below.


1.  Big money is made by holding a trend, not scalping or day trading
When there is no clear trend, stay clear.

2.  Cut losses quickly when wrong, let the big winners run
Protect the open positions with stop cos when we take care of the downside, the upside will take care of itself.

3.  Trade price action not fundamental valuations
Just look at Alibaba. Nuff said.

4.  Wait for confirmation before making an entry
Look for the right signals - whether it's from candlesticks or indicators. Don't trade on impulse or in 'no man's land'.

5.  Focus on a small watchlist to be an expert on their price movements
Personal preference.

6.  Do not enter a second trade if your first trade shows a loss
Aka don't anyhow average down.

7.  Best trades are winners right from the start
Back to point 2.

8.  Don't trade unless the market presented an appropriate risk/reward ratio
Same as investing, we need MARGIN OF SAFETY.

PS: Take note too that the harder a stock runs up, the harder it comes crushing down when things turn sour.

Besides shorting the the China large-cap ETF, my latest profit came from shorting Qualcomm (when bad news hit it did a big gap down). I have let go of my position in Kraft Heinz at no loss/gain. Still watching BABA.



"The successful speculator must always have cash in reserve.. .for exactly the right moment. There is a never-ending stream of opportunities in the stock market and, if you miss a good opportunity, wait a little while, be patient, and another one will come along. J.P. reach for a trade, all the conditions for a good trade must be on your side. 
Remember, you do not have to be in the market all the time."

Image result for jesse livermore
Source: https://www.pinterest.com/pin/298996862746535698/



For Bei Kambing beginners, we don't know when we will meet the carnivores. So always remember to exercise stop loss, which is the first aid for "stopping bleeding". 


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Comments

  1. You can see how great trader ended. JS was not the only one. Few other great traders also closed shop.

    ReplyDelete
  2. Closed shop, come back, closed shop. Closed shop rich or closed shop bankrupt. :S

    ReplyDelete

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