21 trading rulesThe 21 Trading Rules of the Great Jesse Livermore. Photo: Wagner T. Cassimiro (Flickr). https://creativecommons.org/licenses/by/2.0/

The 21 Trading Rules of the Great Stock Trader Jesse Livermore

The great Jesse Livermore is widely considered to have been one of the greatest traders to have ever lived.

Born in 1877 and known as the "Boy Plunger" after diving into trading in his early teens, his turbulent life meant that his significant losses became just as famous as his ability to bounce back to success, time and time again.

Reminiscences of a Stock Operator

Reminiscences of a Stock Operator, Edwin Lefevre

His life was unofficially documented in Edwin Lefevre's 1923 book Reminiscences of a Stock Operator, which focused on the philosophy and trading techniques of a stock trader by the name of "Larry Livingstone", which left nobody in doubt as to who it was really about.

The book became an instant hit, and remains a go-to trading bible for many today. No doubt inspired by its success, Livermore himself released his own book 17 years later, How to Trade In Stocks and noted his 21 Rules of Trading; the foundations on which he had built a success that in today's money would have been worth over a billion dollars.

And, given his famous quote below, it would appear that there is never a bad time to read over his 21 rules, which we present below...

There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure.Jesse Livermore

Jesse Livermore's 21 Trading Rules

  1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.
  2. Money cannot consistently be made trading every day or every week during the year.
  3. Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.
  4. Markets are never wrong – opinions often are.
  5. The real money made in speculating has been in commitments showing in profit right from the start.
  6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
  7. One should never permit speculative ventures to run into investments.
  8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
  9. Never buy a stock because it has had a big decline from its previous high.
  10. Never sell a stock because it seems high-priced.
  11. I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.
  12. Never average losses.
  13. The human side of every person is the greatest enemy of the average investor or speculator.
  14. Wishful thinking must be banished.
  15. Big movements take time to develop.
  16. It is not good to be too curious about all the reasons behind price movements.
  17. It is much easier to watch a few than many.
  18. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.
  19. The leaders of today may not be the leaders of two years from now.
  20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
  21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.

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