Jesse Livermore

In times of distress, it is always useful to remember that past traders with skills vastly superior to ours also struggled from time to time. To succeed, it is not only essential to become a student of the game but also to study those who -in spite of having odds against them- were able to overcome great difficulties and make it to the final line. I can’t list all the traders I have on my list but a few names I always keep coming back are: Jesse Livermore, Ed Seykota, Dan Zanger, Paul Tudor Jones, William O’Neil, Monroe Trout, Victor Neiderhoffer and Dave Landry.  More interestingly, it is what they have said and done -as a reflection of their underlying beliefs- what carries many of the critical lessons. It isn’t any kind of wisdom you may find written in a book or manual. There isn’t any.

 This is what makes the sayings below so valuable and I would encourage you to make a note of this page. But always

Nicolas Darvas

remember that success comes from hard work, dedication and discipline. One step at a time. Being in the right place at the right time can also make you wealthy but you may get lucky only to see your achieved gains disappear faster than they were made if you can’t get out of the markets when the time is due. Many times, the greatest achievement of a successful trader is leaving the market with as much of his/her wealth still intact. Which means keeping your bankroll in place for when THAT time comes. Those that made it really big surely took oversized risks and leveraged exponentially. So even when discipline, consistency and risk management are critical for increasing and preserving your capital, the really big money comes with the really big moves and the really big leverage. 

But you must protect your funds so that they can be used when big leverage is in and risk aversion is out. When compounding makes you feel you are on a rollercoaster that is only going up. Always with the proper mindset: being ready to really ride it big accepting the ocassional blow up.-

The sayings below have been taken from Trade2win.com forum. 

Jesse Livermore: 

“I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit. Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market the game is to buy and hold until you believe the bull market is near its end.” 

“Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul.” 

“It sounds very easy to say that all you have to do is to watch the tape, establish your resistance points and be ready to trade along the line of least resistance as soon as you have determined it. But in actual practice a man has to guard against many things, and most of all against himself – that is, against human nature. A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask for reasons or explanations. It was never my thinking that made me money but my sitting tight.” 

Dan Zanger: 

“Be very quick to sell your stock should it return back under the trend line or breakout point. Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly.” 

Bruce Kovner: 

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” 

Richard Dennis: 

“The worst mistake a trader can make is to miss a major profit opportunity. 95 percent of profits come from only 5 percent of the trades.” 

Gary Bielfeldt: 

“The most important thing is to have a method for staying with your winners and getting rid of your losers.” 

Paul Tudor Jones: 

“I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them. The most important rule of trading is to play great defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.” 

Michael Marcus: 

“Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers.” 

Ed Seykota: 

“The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.” 

“There’s bold traders and there’s old traders, but there’s no old bold trader’s.” 

Larry Hite: 

“It is incredible how rich you can get by not being perfect.” 

William O’Neill: 

“Investors cash in small, easy-to-take profits and hold their losers. This tactic is exactly the opposite of correct investment procedure. Investors will sell a stock with profit before they will sell one with a loss. The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.” 

Bill Lipschutz: 

“I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time. It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader. So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain. Avoid the temptation of wanting to be completely right.” 

William Eckhardt: 

“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.” 

“What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.” 

Brett Steenbarger: 

“As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability.” 

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