How To Trade In Stocks

Jesse Livermore lived during the Great Depression and was known as "The Boy Plunger" for taking on large positions. He had been trading stocks since he was 15 and was regarded as one of the best speculators of his time. He made and lost millions, and this was back when a million was a lot of money. If Livermore was alive today he would be one of the most sophisticated traders around.

I've read this book eight times and every time I read it, I pick up something new. It is so easy to read it feels as if the author is talking to you one on one. In the book he reveals his personal rules of trading, his money management procedures, his entry and exit strategies, and his rules for emotional discipline.

A lot of what he says is common sense. At least it seems that way when he explains it but it goes against what the Wall Street machine tells us. For example, Livermore stresses that you should "never average down. Why add to a trade you are already losing money on?" He also describes the foibles of buy and hold. Many people of his time bought the blue chips of the day the railroads, steamship companies, buggy whip companies, and others who are no longer around. "Life is change" he reasons, "your clothes change, your kids change, you change lovers. So why cannot the reason you buy a stock change?"

Some of his rules include:

Always trade with the trend, along the line of least resistance.
Make sure all the factors are in your favor before you make a trade. (The factors are detailed in the book)
Stay with the leading stocks of the day
Group action is a key to timing Stocks do not move alone.
Do not buy your entire position at once.
Always have a stop before you get in a trade. (Livermore used 10%)
Never takes tips from anyone
Never argue with the tape.
You should not be in the market all the time.

One of the things that helped me was that after a large successful trade, the author recommends taking half the profit out of the market. Put it away somewhere safe.

Even though the author says he never used charts, it seems that he was a technical, trend follower by today's definitions. He got in on what he called Pivotal and Continuation Points which he describes in Chapter 5.

Even though most of the book is put together by Smitten, it is still an enjoyable read for someone looking to put together a trading strategy and system. Someone who is new to the stock market will find a plethora of beneficial information. I've also read Reminiscences of a Stock Operator which is the story of a trader based on Livermore's life and Smitten's Jesse Livermore: World's Greatest Stock Trader and learned a lot from each of those as well.

I hope this review helps you in your decision to buy this book or not. I find that it is a mandatory read for all investors and traders. It has definitely helped me to improve my stock trading. If you want to read more of my reviews of stock trading and investment books, you can get them our website listed below.