In the early part of the 20th century, Jesse Livermore was the most successful (and most feared) stock trader on Wall Street. He called the stock market crash of 1907 and once made $3 million in a single day. In 1929, Livermore went short several stocks and made $100 million. He was blamed for the stock market crash that year, and solidified his nickname, "The Boy Plunger." Livermore was also a successful commodities trader.
I think the most valuable knowledge one can gain regarding trading and markets comes from studying market history, and studying the methods of successful traders of the past. Jesse Livermore and Richard Wyckoff are two of the most famous and successful traders of the first half of the 20th century. Many of the most successful traders of today have patterned their trading styles after those of the great traders of the past.
Here are some valuable nuggets I have gleaned from the book, "How to Trade Stocks," by Jesse Livermore, with added material from Richard Smitten. It's published by Traders Press and is available at Amazon.com. Most of the nuggets below are direct quotes from Livermore, himself.
"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis."
"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor."
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.
Livermore's money made in speculation came from "commitments in a stock or commodity showing a profit right from the start." Don't hang on to a losing position for very long.
"It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind."
"Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reapbenefits from their mistakes."
"When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day."
Livermore coined what he called "Pivotal Points" in a market or a stock. Basically, they were: (1) Price levels at which the stock or market reversed course previously--in other words, previous major tops or bottoms; and (2) psychological price levels such as 50 or100, 200, etc. He would buy a stock or commodity that saw a price breakout above the Pivotal Point, and sell a stock or commodity that saw a price breakout below a Pivotal Point.
"Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend."
A prudent speculator never argues with the tape. Markets are never wrong--opinions often are.
Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly.
"I absolutely believe that price movement patterns are being repeated. They are recurringpatterns that appear over and over, with slight variations. This is because markets aredriven by humans--and human nature never changes."
When you make a trade, "you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade."
"I am fully aware that of the millions of people who speculate in the markets, few peoplespend full time involved in the art of speculation. Yet, as far as I'm concerned it is a full-time job--perhaps even more than a job. Perhaps it is a vocation, where many are calledbut few are singled out for success."
"The big money is made by the sittin' and the waitin'--not the thinking. Wait until all the factors are in your favor before making the trade."
An important point I want to make is that Jesse Livermore's trading success came not because of any "inside" information or some huge store of knowledge he had about each and every stock or commodities market he traded. Livermore's trading success was derived from his understanding of human behavior. He realized early on that markets and stocks can and do change--but people and their behaviors do not. Therein lay his formula for trading success. That formula for trading success has not changed since Livermore's hey day in the stock and commodities markets almost a century ago.
A final note: Jesse Livermore may have been called the greatest stock market trader of the 20th century, but I question that notion. Certainly, no one can disagree that his profits were immense and his trading prowess was unmatched. But his life was not in balance. He was a "workaholic" who paid too little attention to his family. Livermore put a gun to his head and pulled the trigger in 1940. He "crashed and burned." You must have balance in your life to achieve lasting successat any endeavor. Trading markets is no exception.........
excerpt from Jim Wyckoff
Tuesday, June 29
Thursday, June 17
go wih the flow
You must live in the present, launch yourself on every wave, and find your eternity in each moment...Henry David Thoreau
How do we create our best life?How do we find that longed-for balance of fulfillment, orderliness, financial stability, and relationships? How do we produce the outcome we want in any area of life? And when do we achieve it?
There are thousands of so-called experts on this subject. They claim to know more about what is good for us than we do ourselves. They bombard us with a continual flood of information and incentives about how to improve our health, our income, our looks and just about every aspect of our lives.Vulnerable and needy individuals are thirsting for their advice. The "perfect life gurus" are selling something we want. They're selling the hope of an outcome, and we are buying---to the tune of billions of dollars a year!
How is this working out for us?Is it actually working out? Or are we getting stuck in hope and not moving beyond it?For most of us, it seems we are neither achieving the outcome and, perhaps more unsettling-we seem to have lost our way.
Hope and outcome aren't bad in and of themselves.Great achievements started with hope, but they needed action to implement them.Hope without action is just that. Outcome?We can't know what we don't know and no one knows the future. As a trader, one of my daily affirmations is: Detach from the outcome of each trade.
Even after the carnage of 2008, there are traders that refuse to sell short because they are attached to the outcome of being long. It's anti-American, disloyal to short," say those who hold on to stocks far longer than they should. "You're turning your back on a long-time friend! Winners never quit and quitters never win," and so on. They are attached to the outcome, thinking that letting go of their unproductive stock picks would prove disastrous (They It will come back-I just know it!') Many are still in the buy and cry mode, despite suffering enormous losses to their portfolios---sometimes as much as 40-60%
They have stepped out of the present moment into the hands of some unknown future where the power is out of their control. Many who have not opened their brokerage statements for months because "I can't stand to look anymore" are now in the buy and deny mode.
This is similar to people who stay in bad relationships. Even though the hurtful behaviors never change, some days are better than others-enough to create the slim hope that he or she will one day wake up and everything will be just wonderful. Meanwhile, the relationship is like a roller coaster ride with breathtaking dips, pitches, jolts, bumps, and curves. What might have been fun and enjoyable becomes painful, unpredictable, and out of control. A couple with that sort of a yo-yo pattern is attached to the outcome that things will be better-tomorrow. So they don't live in "today," staying instead in the rut of hope---day after day, tomorrow after tomorrow. Eventually they wake up and realize nothing they had hoped for came true for them. What a sad day that is! It doesn't have to be yours.
In all areas of life, including trading, if you can make that transition to get out of the future and back to the present, you can be in control of what you think and what you do, especially with your stock positions. Sever your attachment to outcome, and think, "There is no tomorrow, just today. Just now. This is the perfect moment and I am always in it."
I know from personal experience how liberating this is.That was the basis for my first book: Personal Responsibility: The Power Of You. I strive every day to take personal responsibility for everything I say, do, feel and think.The only way to do this is to constantly come back center-to the moment, the here and now. I don't always succeed, but that is not the point.It's about progress-not perfection-much the same as learning to trade or striving to be the best human being we can be. Being in the present brings freedom and authenticity.It means that we are radically honest with ourselves and others and that we stand ready to accept the consequences-no matter what they are.We are not living in some future fantasy world.We are fully present in the flow of whatever is going on.
In the markets, flow behavior is rewarded because it allows us to be flexible, adaptable and give us what the markets are offering-rather than what we think they ought to offer.It reminds us that every moment in the markets is unique and that anything can happen at any time. By releasing attachment to outcome, we have freedom to be fully in control of how we respond.It releases us from the chaos of reacting, from rat-braining and from the emotional gyrations that almost always lead to losses. It leads us to come back constantly to the nine most important words each of us can ever ask: "Is this the best I can do right now?
The point of power is always in the present moment...Louise L. Hay
Thanks and Good Trading!
Janice Dorn, M.D.,Ph.D.
How do we create our best life?How do we find that longed-for balance of fulfillment, orderliness, financial stability, and relationships? How do we produce the outcome we want in any area of life? And when do we achieve it?
There are thousands of so-called experts on this subject. They claim to know more about what is good for us than we do ourselves. They bombard us with a continual flood of information and incentives about how to improve our health, our income, our looks and just about every aspect of our lives.Vulnerable and needy individuals are thirsting for their advice. The "perfect life gurus" are selling something we want. They're selling the hope of an outcome, and we are buying---to the tune of billions of dollars a year!
How is this working out for us?Is it actually working out? Or are we getting stuck in hope and not moving beyond it?For most of us, it seems we are neither achieving the outcome and, perhaps more unsettling-we seem to have lost our way.
Hope and outcome aren't bad in and of themselves.Great achievements started with hope, but they needed action to implement them.Hope without action is just that. Outcome?We can't know what we don't know and no one knows the future. As a trader, one of my daily affirmations is: Detach from the outcome of each trade.
Even after the carnage of 2008, there are traders that refuse to sell short because they are attached to the outcome of being long. It's anti-American, disloyal to short," say those who hold on to stocks far longer than they should. "You're turning your back on a long-time friend! Winners never quit and quitters never win," and so on. They are attached to the outcome, thinking that letting go of their unproductive stock picks would prove disastrous (They It will come back-I just know it!') Many are still in the buy and cry mode, despite suffering enormous losses to their portfolios---sometimes as much as 40-60%
They have stepped out of the present moment into the hands of some unknown future where the power is out of their control. Many who have not opened their brokerage statements for months because "I can't stand to look anymore" are now in the buy and deny mode.
This is similar to people who stay in bad relationships. Even though the hurtful behaviors never change, some days are better than others-enough to create the slim hope that he or she will one day wake up and everything will be just wonderful. Meanwhile, the relationship is like a roller coaster ride with breathtaking dips, pitches, jolts, bumps, and curves. What might have been fun and enjoyable becomes painful, unpredictable, and out of control. A couple with that sort of a yo-yo pattern is attached to the outcome that things will be better-tomorrow. So they don't live in "today," staying instead in the rut of hope---day after day, tomorrow after tomorrow. Eventually they wake up and realize nothing they had hoped for came true for them. What a sad day that is! It doesn't have to be yours.
In all areas of life, including trading, if you can make that transition to get out of the future and back to the present, you can be in control of what you think and what you do, especially with your stock positions. Sever your attachment to outcome, and think, "There is no tomorrow, just today. Just now. This is the perfect moment and I am always in it."
I know from personal experience how liberating this is.That was the basis for my first book: Personal Responsibility: The Power Of You. I strive every day to take personal responsibility for everything I say, do, feel and think.The only way to do this is to constantly come back center-to the moment, the here and now. I don't always succeed, but that is not the point.It's about progress-not perfection-much the same as learning to trade or striving to be the best human being we can be. Being in the present brings freedom and authenticity.It means that we are radically honest with ourselves and others and that we stand ready to accept the consequences-no matter what they are.We are not living in some future fantasy world.We are fully present in the flow of whatever is going on.
In the markets, flow behavior is rewarded because it allows us to be flexible, adaptable and give us what the markets are offering-rather than what we think they ought to offer.It reminds us that every moment in the markets is unique and that anything can happen at any time. By releasing attachment to outcome, we have freedom to be fully in control of how we respond.It releases us from the chaos of reacting, from rat-braining and from the emotional gyrations that almost always lead to losses. It leads us to come back constantly to the nine most important words each of us can ever ask: "Is this the best I can do right now?
The point of power is always in the present moment...Louise L. Hay
Thanks and Good Trading!
Janice Dorn, M.D.,Ph.D.
Monday, June 7
tada emosi... tu cara nya
.. petikan dari Van K. Tharp, Ph.D.
What would happen if you could just pay attention to what the market is doing right now? You’d be totally in the present with no preconceived ideas or biases to influence you. If you did that, your trading would probably accelerate to a new level. Well, you can trade that way if you practice mindfulness.
Mindfulness first came to my attention as a form of meditation in which you simply quiet your mind and then "watch your thoughts" as they come up. When a thought pops into your mind, you simply notice that it is there and then you release it. That’s all there is to the meditation, but it can have a profound impact on your life if you do it regularly.
Mindfulness is also a state of being. Harvard psychologist, Ellen Langer, has popularized the term through two books—Mindfulness and The Power of Mindful Learning. She defines mindfulness as a state of being in which one is likely to be: 1) creating new categories, 2) welcoming new information, 3) looking at things from more than one perspective, 4) controlling the context, and 5) putting the process before the outcome.
Each of these aspects of mindfulness could be an entire peak performance tip. I’d like to cover the first three categories about mindfulness in today’s tip and then continue the topic next week.
1) Creating New Categories
Mindfulness is the opposite of mindlessness. Mindlessness means living by your conditioning. It means assuming that all of your beliefs are fixed and true, so that all you can do is find evidence to support that truth. Mindfulness, in contrast, is the continual creation of new concepts and categories with no real attachment to their truth.
For example, think about your last day of trading—what was it like? You might say, "I put on some long trades and some short ones. I also closed out some trades—some at a profit and some at a loss. In between, I watched the market."
Even if I offered you money for everything you could list that you did yesterday with respect to trading—you still probably couldn’t come up with much more than what I just listed. Yet, you did so much more. You probably experienced a thousand different emotions, which you’ve forgotten. You probably read 100 or 1,000 news items. You probably talked on the phone to some people. You probably did some of the 10 tasks of trading (if you know what they are). But unless I mention those things to you, you probably wouldn’t even think of them.
Most strong opinions rest upon global categorization. The market went up yesterday. We’re in a c-wave of an ABC correction. I lost money yesterday. I followed my system yesterday. We’re in an up move in a secular bear market. I should pay attention to what is going on now in the market. All those statements are global categories that you probably use to form your opinions. But what if you formed new categories of thought about the market? Think about the market in great detail. Who are the different players? What do you think each of them is doing with respect to the market? Call people you know and notice their reactions and their perspectives. Break old thinking patterns by creating new categories and you’ll step up your trading as well.
In many ways, this aspect of mindfulness is a lot like reframing as discussed in my Peak Performance Course for Investors and Traders. It gives you a new perspective and a new attitude about trading
2) Welcoming New Information
New information is continually impinging upon all living creatures, and their ability to survive generally depends upon their openness to that information. Research has shown that people undergo temporary psychological damage if they are deprived of new information for any length of time. Young animals, if deprived on sensory input, become severely impaired later in life. You need sensory information to stimulate you.
Most people are continually exposed to new information, so the lack of it is not a problem. However, most of us tend to filter, generalize, distort, or delete most of that information. Becoming more receptive to the information that is coming in to you is a major step toward improving your performance as a trader.
3) Looking at Things from Multiple Perspectives
There are at least three general "positions" or "perspectives" from which any information can be viewed. The first perspective is the "I" position—how does this information affect me?
The second perspective, position two, is how does it affect another person directly—what is that person’s perspective? That second position might be that of the person who takes the opposite side of your trade or perhaps the person who is making the market for you. Looking at new information from that person’s perspective might be quite valuable to do.
The third perspective is that of the neutral observer who is watching all of the other participants. This is like someone out in space who can see what everyone else is doing and then view everything from a global perspective.
These three perspectives were crucial in Einstein’s thinking processes. It was part of how Einstein’s formed his great ideas about relativity. Those perspectives are also the basis for some of the most powerful change work that I know about. So try them on. Of course, there are many possible players for positions one and two. You can try on numerous possibilities and gain tremendous insights as a result of doing so. You’ll gain choice in how to respond, empathy for other people, and the ability to change your own behavior much easier.
Remember that most people have perfectly "good" reasons for behavior that you might consider to be negative. The intentions behind those behaviors are "good." If you close out a trade early, are you "nervous" or are you "cautious?" If you fail to take a trade, is it because you are "afraid" or because you haven’t totally developed and tested your plan for trading? Typically, the behaviors that you most want to change are the mirror images of the qualities you value most. Thus, if you are having trouble "pulling the trigger," you probably value a thoroughly tested plan and don’t really have one.
What would happen if you could just pay attention to what the market is doing right now? You’d be totally in the present with no preconceived ideas or biases to influence you. If you did that, your trading would probably accelerate to a new level. Well, you can trade that way if you practice mindfulness.
Mindfulness first came to my attention as a form of meditation in which you simply quiet your mind and then "watch your thoughts" as they come up. When a thought pops into your mind, you simply notice that it is there and then you release it. That’s all there is to the meditation, but it can have a profound impact on your life if you do it regularly.
Mindfulness is also a state of being. Harvard psychologist, Ellen Langer, has popularized the term through two books—Mindfulness and The Power of Mindful Learning. She defines mindfulness as a state of being in which one is likely to be: 1) creating new categories, 2) welcoming new information, 3) looking at things from more than one perspective, 4) controlling the context, and 5) putting the process before the outcome.
Each of these aspects of mindfulness could be an entire peak performance tip. I’d like to cover the first three categories about mindfulness in today’s tip and then continue the topic next week.
1) Creating New Categories
Mindfulness is the opposite of mindlessness. Mindlessness means living by your conditioning. It means assuming that all of your beliefs are fixed and true, so that all you can do is find evidence to support that truth. Mindfulness, in contrast, is the continual creation of new concepts and categories with no real attachment to their truth.
For example, think about your last day of trading—what was it like? You might say, "I put on some long trades and some short ones. I also closed out some trades—some at a profit and some at a loss. In between, I watched the market."
Even if I offered you money for everything you could list that you did yesterday with respect to trading—you still probably couldn’t come up with much more than what I just listed. Yet, you did so much more. You probably experienced a thousand different emotions, which you’ve forgotten. You probably read 100 or 1,000 news items. You probably talked on the phone to some people. You probably did some of the 10 tasks of trading (if you know what they are). But unless I mention those things to you, you probably wouldn’t even think of them.
Most strong opinions rest upon global categorization. The market went up yesterday. We’re in a c-wave of an ABC correction. I lost money yesterday. I followed my system yesterday. We’re in an up move in a secular bear market. I should pay attention to what is going on now in the market. All those statements are global categories that you probably use to form your opinions. But what if you formed new categories of thought about the market? Think about the market in great detail. Who are the different players? What do you think each of them is doing with respect to the market? Call people you know and notice their reactions and their perspectives. Break old thinking patterns by creating new categories and you’ll step up your trading as well.
In many ways, this aspect of mindfulness is a lot like reframing as discussed in my Peak Performance Course for Investors and Traders. It gives you a new perspective and a new attitude about trading
2) Welcoming New Information
New information is continually impinging upon all living creatures, and their ability to survive generally depends upon their openness to that information. Research has shown that people undergo temporary psychological damage if they are deprived of new information for any length of time. Young animals, if deprived on sensory input, become severely impaired later in life. You need sensory information to stimulate you.
Most people are continually exposed to new information, so the lack of it is not a problem. However, most of us tend to filter, generalize, distort, or delete most of that information. Becoming more receptive to the information that is coming in to you is a major step toward improving your performance as a trader.
3) Looking at Things from Multiple Perspectives
There are at least three general "positions" or "perspectives" from which any information can be viewed. The first perspective is the "I" position—how does this information affect me?
The second perspective, position two, is how does it affect another person directly—what is that person’s perspective? That second position might be that of the person who takes the opposite side of your trade or perhaps the person who is making the market for you. Looking at new information from that person’s perspective might be quite valuable to do.
The third perspective is that of the neutral observer who is watching all of the other participants. This is like someone out in space who can see what everyone else is doing and then view everything from a global perspective.
These three perspectives were crucial in Einstein’s thinking processes. It was part of how Einstein’s formed his great ideas about relativity. Those perspectives are also the basis for some of the most powerful change work that I know about. So try them on. Of course, there are many possible players for positions one and two. You can try on numerous possibilities and gain tremendous insights as a result of doing so. You’ll gain choice in how to respond, empathy for other people, and the ability to change your own behavior much easier.
Remember that most people have perfectly "good" reasons for behavior that you might consider to be negative. The intentions behind those behaviors are "good." If you close out a trade early, are you "nervous" or are you "cautious?" If you fail to take a trade, is it because you are "afraid" or because you haven’t totally developed and tested your plan for trading? Typically, the behaviors that you most want to change are the mirror images of the qualities you value most. Thus, if you are having trouble "pulling the trigger," you probably value a thoroughly tested plan and don’t really have one.
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