Jesse Livermore Advice

...Times are tough in the market and we haven’t been in an up-trend since late last year. Many “talking-heads” on TV and radio are claiming they have get rich quick stock schemes, hot stock tips or systems that can be used in less than one hour per week. I laugh at these claims and feel pity for the novice that gets suckered into these money scams. Like any endeavor in life, success in the stock market takes time, lots of time to learn and develop a successful system. Over time, this system will be modified slightly to accommodate the changes in your life and the world around us. Without constant involvement and study, you will not be successful at managing your own portfolio over lengthy periods of time. If you do not have the time to manage your own money, please take the time to hire a qualified professional that has a lengthy track record with other clients in both bull and bear markets.

Many novice investors believe that fortunes will be yielded from the stock market with minimal amounts of work. I ask myself: How can anyone be so naïve? Nothing comes easy in life and the stock market is no different. I look to one of my mentors for advice, comfort and direction when things are not working as planned. His name is Jesse Livermore. He passed away in the 1940’s and is considered one of the greatest speculators (investors) that Wall Street has ever witnessed. The quote below by Livermore is arguably the best quote ever said pertaining to Wall Street:

“BEWARE of IGNORANCE – The market must be studied and learned, not in a casual way, but in a deep knowledgeable way. The stock market, with its allure of easy money and fast action, induces people into the foolish mis-handling of their money like no other entity.
THE REVERSE OF IGNORANCE IS KNOWLEDGE, AND KNOWLEDGE IS POWER!” - Jesse Livermore

Read this quote aloud several times and think about what it is saying. With our current market situation, now is the time to be reading and studying as much as you can while your cash is waiting on the sidelines patiently. The ‘M’ in CANSLIM is negative and we have not seen a group of quality leaders since 2005 has started. I highly recommend reading “How to Trade in Stocks” by Jesse Livermore. If you have already read this book, reread it; I have read this book in its entirety at least one dozen times and refer it numerous times every year. Another great book to read about the life of Jesse Livermore is “Reminiscences of a Stock Operator” by Edwin Lefevre (arguably the greatest book ever written about the stock market).

If you are not comfortable shorting stocks or playing our red flags, then cash is your best position in this current sideways market. As your cash earns minimal interest in a money market account, you should be studying your past trades, your past mistakes, your past successes and reading about the markets as much as possible. If you waste this precious time now, you will not have the luxury of additional time when the leaders do present themselves and your skills may lack when the time comes to make a profit. To start, read over our entire free Philosophy and Education section of the website and then study the common chart patterns on our Technical Analysis Guidelines page. Become familiar with everything on these two pages and try to locate similar patterns on current stocks making our screens. In sports, they always say that practice makes perfect and I believe this statement to be true with stocks. Note: No one will ever be perfect but you get the idea.

Piranha