Lessons from Jesse Livermore Part 4: A time for all things

The Lessons from Jesse Livermore Series explores the trading philosophy and trading rules of renowned trader, Jesse Livermore.  Although developed a century ago, Livermore’s ideas have great relevance for today’s traders.

Reminiscences of a Stock Operator
Chapter 2;  page 14; paragraph 2


“I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game—that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily—or sufficient knowledge to make his play an intelligent play.”

The Lesson

Have the patience to stick to your game plan!  Livermore points out that when he was patient waiting for his particular set up and stuck to his game plan that he had a solid winning record.  Precedents favored his intelligent play.

Having patience to wait for your preferred set up and sticking to one’s game plan seems so obvious that it is almost a throwaway line in any conversation about becoming consistently successful in trading.   In my experience, often the simplest of statements are the most difficult to execute.  As traders we want to trade. As a result we often manufacture set ups that are not there.  If we do find a prime set up and take a trade, more times than not, we undercut ourselves by not sticking to our trading plan ( if we even bother to have a plan or to write it down ).  Maybe you have found that to be true as well.

It takes real work to crystallize one’s “go-to” set-ups and then wait patiently for them to present themselves. Once presented it takes discipline to stick to the plan, even when the trade does not pan out and the plan calls for taking a small loss.

Action Ideas

  • Do you have your key, go-to set ups identified? If not, begin cataloging the set-up’s you like to trade.  Keep performance records for each set up.  You may be surprised to learn that your favorite set-up’s are not making you any money. 
  • Be patience and wait for your primo set-up(s) . Do not take any trade that does not fit into your set-up criteria; there is a time for all things. Dont simply take a trade out of boredom.
  • Force yourself you write a detailed trading plan for each trade. At the very least, this will slow you down and reduce the chance of making an impulsive trade.  Include in your plan the set up, entry, exit and stop lost criteria.  
  • Follow your trade plan to the letter, no matter the result.
  • Recap your trade and make notes.
  • Redefine a successful trade as one in which you remained patient for the set up and faithfully executed your trading plan to the letter regardless of monetary gain or loss.

Happy Hunting and good Trading!

Like the Series so far?  Here are links to additional installments

Part 2:  Stop asking why   HERE              Part 3: Play a Lone Hand  HERE

Part 4:  A Time for all Things  HERE     Part 5: Expensive Enemies  HERE

Part 6: Commissions Matter  HERE     Part 7: Blown up Accounts  HERE

Part 8: Imaginary Millions HERE            Part 9: Give it Time    HERE 

Part 10: Sit Tight    HERE            Part 11: How to Buy and Sell Stocks   HERE

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