The Jesse Livermore Diaries/Scrapbook

[notanewmember]

I think I will start a thread on this after all and pool everything here from my trade diary. I don't know if anybody has discovered other resources, so please feel free to put them on this thread.

 

We never know the precise time scale Jesse Livermore makes his first millions, there are no charts, no phrases in Reminisces of a Stock Operator by Edwin Lefevre that gives us a clue. However, on the last page of Flumianis book, Jesse Livermore advises;

 

"Allow yourself 3 years to make a million."

 

Here is a list of the Jesse Livermore books;

 

How to Trade In Stocks 1940 by Jesse Livermore

 

The Stock Trading Secrets of the Late Jesse Livermore by C M Flumiani (registration is free, needed to access)

[Traineeinvestor]

There's a list of Livermore's 21 rules here: http://www.businessinsider.com/jesse-livermores-21-trading-rules-2013-2 I agree with most of them (but I'm not much of a trader so that doesn't mean much).

 

As fascinating as Livermore is, I struggle to have the faith to follow a trader who managed to bankrupt himself twice, died more or less broke (only trust money remained for his sons), probably suffered from depression for many years and committed suicide.

[drbubb]

We never know the precise time scale Jesse Livermore makes his first millions...

 

I think he made and lost three fortunes, if memory serves...

 

But he did have some brilliant and still worthwhile notions about trading

 

I once had a trading run of about 6-7 months, where I made almost 7-figures (and of 10X) in an aggressive trading account,

and then wound up giving back almost all of it in 2-3 months, using the same trading ideas.

 

So I have some sympathy with his up and down trading history. But I am more careful now.

(And thank goodness, it was not my only account.)

[Van]

I have read both Reminiscences and "Trade like Jesse Livermore".

 

The first has been well covered, the latter is worth getting as it actually teaches you how Livermore read the tape and the action he would take upon observation of it.

 

Most of Livermore's trading wisdom is already well published. It's no secret, and you will find the same rules in nearly all good system.

 

Cut losses early, let winners run

Never add to loser

Never anticipate the market - wait for it to confirm or invalidate your idea

Learn to be patient with winners; allow them to give you a reversal sign

 

etc..

 

there's no great secrets here. The hard part is following them!!

[notanewmember]

Yes. There are no secrets. There are no MACD, Gan lines or Fibonacci numbers or the 30 odd other indicators to worry about. Just price, and volume. What happens if the chart providers made it very expensive to have these indicators that we have largely enjoyed for free? That could happen. How can one trade or invest if technical and fundamental information was taken away?

 

[notanewmember]

Jesse Livermore traded the US markets. He said to focus on the strongest industries and the strongest stocks within that industry. By the simplest method I shall create an experiment on this thread and you all can follow this experiment in real time too. I know nothing about the US markets so this will be something new for me too.

 

If one goes to bigcharts.marketwatch.com, and select the industries tab.

 

Now scroll down, and you will see the top ten best performing industries for the last 3 months. It is set to default at 3 months, we'll keep it that way as I don't know any better at this moment.

 

Right now Tyre makers are at the top as the best performer. Why I don't know, are people traveling more by road? I am not in the business to find out why.

 

Click on the tyre industry. You can also view the industry index chart (the little icon with a chart picture on the right). It is in a uptrend, a uptrend basically defined as the right hand side of the chart sloping up higher than the left hand side.

 

The top performing stock is CTB and next is GT. Take a look at both charts, by opening a new browser window for each stock. Direct your browser to bigcharts.marketwatch.com, and type "CTB" in the search window, and click on Advanced chart afterwards. It should show one year of data, and each mark or "bar" is a days worth of trading action on a "daily" chart. We need to ensure both charts are both moving up in uptrends, and not aberrations. Look for confirming action.

 

Also have a look at the SP500, in another chart window, to check the overall action of the market. If the market is in a uptrend, then we want to be "long" (buying stocks), as opposed to being "short" (betting prices will go down).

 

CTB, I've never heard of. But look, it has broke out from the 30 area, a round number and therefore a potential pivotal point!* Right now the stock is 33.61, and it broke out with colossal volume. We could enter here with a stop at 28.00 with a target of 43. Let us come back in 3 months (on a weekend when the market is closed) to see if we can pyramid on to our position at 43.

 

GT is Goodyear Tyres.

 

This is for fun only - Do your own research. I have wrote this in a basic manner, so even Mrs Notanewmember can follow this. No guarantees of course - the market could turn and all bets are off!

 

*Look back further in time for CTB and GT. Did they clear the previous round numbers in a similar fashion? 10, 20 etc?

[notanewmember]

Some Zealllc articles on Jesse Livermore;

 

Part 1 http://www.zealllc.com/2003/jesse01.htm

Part 2 http://www.zealllc.com/2003/jesse02.htm

Part 3 http://www.zealllc.com/2003/jesse03.htm

Part 4 http://www.zealllc.com/2003/jesse04.htm

Part 5 http://www.zealllc.com/2003/jesse05.htm

Part 6 http://www.zealllc.com/2003/jesse06.htm

Part 7 http://www.zealllc.com/2004/jesse07.htm

Part 8 http://www.zealllc.com/2004/jesse08.htm

[notanewmember]

The Richard Smitten Interview, on Financial Sense Newshour in 2004 - http://www.financialsensearchive.com/Experts/2004/Smitten.html

[notanewmember]

There aren't many decent videos of the man, I think this is the only other one;

 

[drbubb]

What a wonderful, cautionary tale !

 

I reckon the fisherman (an ex-President) came out of the period best:

 

"Fishing teaches humility. In front of fish, all men are equal."

 

Ultimately, markets teach humility too. But for some, it takes a long time, or maybe they die first.

[notanewmember]

There's a list of Livermore's 21 rules here: http://www.businessi...rules-2013-2 I agree with most of them (but I'm not much of a trader so that doesn't mean much).

 

The Livermore 21 Trading Rules

 

The link is broke! I have found the correct one here: http://www.businessinsider.com/jesse-livermores-21-trading-rules-2013-2

[notanewmember]

What a wonderful, cautionary tale !

 

I reckon the fisherman (an ex-President) came out of the period best:

 

"Fishing teaches humility. In front of fish, all men are equal."

 

Ultimately, markets teach humility too. But for some, it takes a long time, or maybe they die first.

 

That clip is from a PBS documentary, and the full version is here;

 

http://www.youtube.com/watch?v=KE9aFqEyUhA

[notanewmember]

CTB.... 33.61

 

 

The stock is 33.61 on Monday during market hours.

[Van]

I think of of the greatest ever trading quotes is from Reminiscences, the one that goes:

 

"It was never my thinking that made big money for me. It was my sitting. Got that? My sitting tight!

... Men who can be right and do nothing are uncommon."

 

This sums up so many trading wisdoms that it is utter genius. When you've entered into a winning trade, let your winners run and run! You will never make momey in the big moves if you always take your profits too early! I also read this that youmshouldn't care too much why a stock is going up or down - don't think too hard about the why, all you need to do is observe that it is doing so and act accordingly. By the time the reason for the move becomes apparent it is often too late.

[notanewmember]

CTB is hovering around where it broke out to, no stop triggered yet. I'm guess it will consolidate for a little while, maybe testing the 30 area.

 

----

 

I have created a Beta Jesse Livermore pivotal point video, but that is on hold right now, until I can get some time to work on it. I believe his major pivotal points were 50, 100, 200, 300, and 400 from his book How To Trade In Stocks. Anything in between is minor. I look back a growth stocks such as ASOS(LSE:ASC), Rightmove(LSE:RMV), N BROWN (LSE:BWNG), and such major round numbers during the earlier years have been pivotal. A whipsaw is actually a good sign that the stock is looking indecisive, and it best to look at something else, and come back to it in 3 months.

 

Maybe we should wait until CTB crosses 50? Or NCR Corp crosses 50? Or perhaps bet small until the major pivotal points are crossed.

[notanewmember]

If we look at an Apple chart, as usual the number or Wins (W) roughly are the same as the Losses (L). Losing trades are a fact of life, but with trailing stops between the major round numbers that should pay for the losing trades. Apple is coming up to a buy signal past the 500 area, perhaps Apple needs to have a weekly close past 503 or better still 530 (501 today) - what is Apple going to do next?

[drbubb]

.... I look back a growth stocks such as ASOS(LSE:ASC), Rightmove(LSE:RMV), N BROWN (LSE:BWNG), and such major round numbers during the earlier years have been pivotal. A whipsaw is actually a good sign that the stock is looking indecisive, and it best to look at something else, and come back to it in 3 months.

 

Rightmove / RMV.L ... 3-yrs / 1400p to 2500p = + 78.6%

 

 

Two key Buy points were 1,000 and 1,400

[notanewmember]

RMV, sobs, I had some of those sub £4 each but I was taken in by the rhetoric that these would crash in the great housing crash that was to come!

 

I think we've a winning formula here:

 

*A growth stock in an industry ideally that is at the frontier

*Not a stalwart blue chip, but smaller/mid cap

*Breakout from round numbers such as 50, 100, 200, 300, 400 etc.

*Additional breakout with one year, Two year or all time new high

[drbubb]

RMV happily "climbed a Wall of Worry"

[notanewmember]

This is new information.

 

http://kingworldnews...m_Sinclair.html

 

In this interview Jim discusses the incredible trading tactics of his father Bert Seligman and Jesse Livermore the two greatest traders of all time, their investing tactics, their investing strategies, taking risk out of the game,

 

Bert Seligman (Jim Sinclair's father) and Jesse Livermore were business partners.

[notanewmember]

Right now the stock is 33.61, and it broke out with colossal volume. We could enter here with a stop at 28.00 with a target of 43. Let us come back in 3 months (on a weekend when the market is closed) to see if we can pyramid on to our position at 43.

 

$33.21. Cooper Tyres is a slow burner! Maybe I should have chosen something more lively on the NASDAQ rather than on the main Industrials NYSE market.

 

I had to have my rear tyres changed today as they were barely legal, and it is getting wet and cold now in the UK.

[notanewmember]

If we look at an Apple chart, as usual the number or Wins (W) roughly are the same as the Losses (L). Losing trades are a fact of life, but with trailing stops between the major round numbers that should pay for the losing trades. Apple is coming up to a buy signal past the 500 area, perhaps Apple needs to have a weekly close past 503 or better still 530 (501 today) - what is Apple going to do next?

 

A recent AAPL daily chart - look how 500 produces gap downs if it isn't going to hold. A lot of people feel this is a psychological number. AAPL can't hold 500, but it is worth more than 400.

[notanewmember]

CTB looks like it is bouncing away from the $30 area. But the action of this stock is so slow, we haven't been able to pyramid, nor have we been stopped out. How frustrating!

I have another candidate stock which is coming up to a buy signal which is a bit more exiting and it is traded on the NASDAQ. We're going to mix Jesse Livermore with a bit of Bernard Beruch wisdom; "“Successful speculation requires staying on top of changes in industries and companies that either create new industries or improve on existing industries."

Our candidate is - NCR Corporation, GEI Thread Here - could this be the next global behemoth? They make ATM machines and automated checkouts. The next time you take money out of the hole in the wall, look for the NCR logo!

Buy trigger at $43, and stop at $38.

 

Do your own research of course.

[notanewmember]

CTB gapped down past our stop!

 

We had a daily close at 25.72. We would have to ensure we sell here for a unpalatable loss of 23.4%

 

^Weekly Chart

 

^Zoomed in - Hourly Chart

 

So what does this experiment mean?

 

1. Not all trades will be winners, despite the best set up buy signals that we see at the time! Gap downs can mean we lose more than planned at the outset. We never plan or want to make a trade to lose money - but the market will do what it wants to do.

 

2. The probe trade ensures your losses will be minimized, and wins will be maximized when you are able to pyramid up (we were not able to).

 

3. There must have been a wall of selling by big money, who had their stops in the same place; the reason for the gap down. It is a bit like gold again at the the 1550 level and falling past it - there are players who watch key areas (yes you.... Goldman Sachs!).

 

4. We cannot, as small fish due to lesson 3. play with the big fish and win - we must look at smaller company shares where people don't have the stops in the same place. We cannot, all get out in the same area! Gap downs represent disorderly markets.

 

5. As this is a leading stock in a leading industry - and it is rolling over, this means there is weakness in the markets. The debt ceiling and government shutdown is hurting markets. Whether this is manipulation or not, we must watch those stops carefully during this period. We have been stopped out on various stocks, even those with good profits in the last few days. Jesse Livermore says to watch the leaders - you won't make any money in the market if you don't watch the leading issues.

 

6. Don't risk more than 5% of your capital on one probe trade - 23.4% of 5% isn't too bad a loss!

[drbubb]

It is Hard to Fight a TREND change... in the general market