Jesse Livermore is one of the world’s greatest traders, having shorted the 1907 and 1929 stock market crash’s and amassing a fortune. Here is a summary of his trading rules, from Richard Smitten’s Jesse Livermore: World’s Greatest Stock Trader.
"Livermore’s rules are often based on thinking against the grain:
- Cut your losses quickly
- Be sure to confirm your judgement before you take your full position
- Let your profits ride if there is no good reason to close out the position
- The action is with the leading stocks, which change with every new market
- Keep the number of stocks you follow limited in order to focus
- New all-time highs are to be bought on breakouts
- Cheap stocks often appear to be bargains after a large drop. They often continue to fall, or have little potential to rise in price. Leave them alone!
- Use pivotal points to identify changes in trends and confirmations in trend
- Don’t fight the tape!"