We often like to refer back to one of the all-time greatest books about trading, Reminscences of a Stock Operator by Edwin Lefevre. This book was originally published in 1923 and is basically a biography of the famous trader Jesse Livermore. There are also other Livermore books out there if you are so inclined.
If you are utilizing active investing and rules-based trading in your portfolio, this book is a must read … and is a good re-read as well. Certainly one of the classic canons for traders (along with other books such as the Market Wizards series and Extraordinary Delusions and the Madness of Crowds).
Let’s have a quick reminder of some of the timeless lessons from Livermore:
“I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because market are driven by humans – and human nature never changes.”
“A prudent speculator never argues with the tape.” Another version is “”I don’t know whether I make myself plain, but I never lose my temper over the stock market. I never argue with the tape. Getting sore at the market doesn’t get you anywhere.”
“Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.”
“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.”
“Professional traders have always had some system or other based upon their experience and governed either by their attitude towards speculation or by their desires.”
“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.”
