The Timeless Wisdom Of Jesse Livermore


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

From  Investors Business Daily,

Why is stock investing hard?

Take a step back to think, and you realize that stock trading is the intersection of many realms of knowledge. Business. The economy. Finance. Innovation and technology. Government policy. The market. And don’t forget psychology.

The more an investor knows about each of these fields, the more likely he or she will excel in the task of buying and selling stocks properly.

In the field of psychology alone, you have multiple topics to ponder. The psychology of the herd is important. So is the psychology of the self.

Jesse Livermore, whose life spanned the 19th and 20th centuries, didn’t get a master’s degree in macroeconomics or a Ph.D. in cognitive behavior. But his experience, hard work, failures and successes across many bull and bear cycles make him one of the most respected stock and futures traders of all time.

Livermore grew up poor in Massachusetts. He found his calling after discovering he had a knack for numbers and for seeing price trends. Trading firms called “bucket shops” across the country kicked him out after he amassed profits despite stringent house rules in margin. He eventually became a powerful buyer and short-seller on Wall Street.

Tragically, a self-inflicted bullet ended Livermore’s life on Nov. 28, 1940. But his book “How to Trade in Stocks” remains a gem. As the following quotes from the first chapter “The Challenge of Speculation,” show, he defined genius in trading psychology.

Why not let Livermore’s wisdom help you?

. “Profits take care of themselves, but losses never do. The speculator has to insure himself against considerable losses by taking the first small loss.”

Your insurance policy: Sell a stock if it falls 8% from your purchase price. No questions, no exceptions. Nobody will care if you sold at a loss. The market surely won’t.

. “Successful speculation is anything but a mere guess. To be consistently successful, an investor or speculator must have rules to guide him.”

If you are new to IBD investing, read the Investor’s Corner every day for three months. In that time span, you’ll get a full course on buy rules, sell rules, and rules in selecting outstanding stocks. Some of IBD’s most successful readers say they clip the column and put them in a scrapbook for easy review.

. “Speculators in stock markets have lost money. But I believe it is a safe statement that the money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.

From my viewpoint, the investors are the big gamblers. They make a bet, stay with it, and if it goes wrong, they lose it all.”

Livermore offers a few examples. On April 28, 1902, New Haven & Hartford Railroad sold at $255 a share. On Jan. 2, 1940, it traded at $0.50. Chicago Northwestern went from $240 in January 1906 to “5/16, which is about $0.31 per share” on Jan. 2, 1940. Nearly 70 years later, some of America’s biggest banks took similar paths.

. “A few thoughts should be kept uppermost in mind. One is: Never sell a stock, because it seems high-priced. You may watch the stock go from 10 to 50 and decide it is selling at too high a level. That is the time to determine what is to prevent it from starting at 50 and going to 150 under favorable earning conditions and good corporate management.”

In a three-year rally from 2004 to 2007, Google (NMS:GOOG) didn’t stop at 200, 300, 400, 500, 600 or 700.

. “One other point: It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let that thought be written indelibly upon your mind.”

Enough said.

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