Mr Jesse Livermore

Posted on 12 April 2011 by Douglas Chadwick

Extracts from this blog were taken from an article written in the Money Week by Tim Rice. It has a lot of interest to anybody using the numbers and philosophy of the Saltydog Investor.
 
Wouldn`t it be nice if investing could be reduced to just following a simple set of rules. Well at the turn of the last century Mr Jesse Livermore did exactly that,and became one of the most successful traders in history. He was born in 1877 and in 1929 was worth over $100 million,equivalent to more than $4 billion today. Admittedly he was trading on the stock market and not unit trusts, but the principle is identical.
 
Livermore wrote the following,"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid,the mentally lazy,or the man of inferior emotional balance,nor for the get rich quick adventurer. They will die poor."
He also wrote,"Never trust your own opinions and back your judgement until the actions of the market confirm your opinions" This is such good advice. At Saltydog we are trying to supply this information to you so that your opinions are informed and your actions sound.
 
These are some of his essential rules.
- Stick with a trend.
- Don't trade when there are no obvious opportunities.
- Wait for the market to confirm your opinions before trading.
- Cut your losses but let your winning positions run.
- Never average down into a losing position.
These rules are not rocket science but how many investors even the professionals follow these obvious rules. There have been successful disciples.
- Ed Seykota turned $5000 into $15million over 12 years.
- Michael Marcus turned $30000 into $80million.
- Bruce Kooner is worth today over $3.5 billion.
- David Harding founder of Winton Capital is worth over $600 million.
So there can be big winners using this principle of Momentum Trading. But you dont have to be this serious you can just follow the principles within your own comfort levels.
 
Essentially this is what Saltydog advocates. Stay on the ladders and get off the snakes. Follow the waves and be that momentum trader.