Knowledge Is Power, So Be As Powerful As You Can!

Jesse Livermore
Jesse Livermore (July 26, 1877 November 28, 1940), also known as the Boy Plunger was an early 20th century stock trader. He was famed for making and losing several multi-million dollar fortunes and short selling during the stock market crashes in 1907 and 1929.

Livermore first became famous after the Panic of 1907, when he short sold the market as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, he predicted that there would be a sharp drop in prices when many speculators were simultaneously forced to sell by margin calls and a lack of credit. With the lack of capital, there would be no buyers in sight to absorb the sold stock, further driving down prices. After the crash and its aftermath, he was worth $3 million.

How Did Jesse Livermore Play The Game?

Wall Street never changes, he said, because human beings never change. Learn from your mistakes, Cut losses/control emotions: A TRADER MUST LEARN AND PRACTICE EMOTIONAL CONTROL. Let the winners ride: Dont dump a winning trade. Beware of stock tips: Never take stock tips under any circumstances. I only lost money when I did not follow my own rules. The book explains the importance of discipline in following the trading rules.

Livermore made two observations at his young age:

1. The majority of traders and investors lost money on a consistent basis. 2. The majority of traders had no intelligent and consistent plan to trade the market.

In effect they were gambling. Playing tips. Playing hunches. Playing the favorites of the moment. Playing all kinds of tipstips from analysts, friends, insiders. Dont try and anticipate what the market will do nextsimply go with the evidence of what the market is telling youpresenting to you.

Jesse Livermore Quotes

Market is driven not by logic but by emotion, it is most often unpredictable and goes against logic There is more money to be made waiting than, by buying and selling! To anticipate the market is to gamble; to be patient and react only when the market gives the signal is to speculate. Classic mistake an investor makes in bull market they become blind to the risk and in bear market they become blind to opportunities When the market gives no clear signals to buy or sell short, many beginners start squinting at their screens, trying to recognize trading signals. A good signal jumps at you from the chart and grabs you by the faceyou cant miss it! It pays to wait for such signals instead of forcing trades when the market offers you none That there is time to go long, time to go short, and time to go fishing. Two criteria for trading liquidity & volatility, Liquidity refers to the average daily volume the higher the Volume, the easier it is to get in and out. Volatility the more it moves, the greater the trading opportunities.

Warren Buffet
Warren Edward Buffett (born August 30, 1930) is an American investor, businessman, and philanthropist. He is one of the most successful investors in history, the primary shareholder and CEO of Berkshire Hathaway, and in 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion. Warren Buffett, one of the most successful investors in America, is fond of saying that when you buy a stock, you become a partner of a manic-depressive fellow he calls Mr. Market. Each day Mr. Market runs up and offers either to buy you out of business or to sell you his share. Most of the time you should ignore him because the man is psychotic, But occasionally Mr. Market becomes so terribly depressed that he offers you his share for a songand thats when you should buy. At other times he becomes so manic that he offers an insane price for your shareand thats when you should sell.

Warren Buffet Quotes

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars. Only when the tide goes out do you discover who's been swimming naked. Price is what you pay. Value is what you get. Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. We enjoy the process far more than the proceeds.

Peter Lynch
Peter Lynch, a highly successful money manager, writes that he only buys stocks in companies that are so simple that an idiot could run thembecause eventually one will.

You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets. There's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or, worse, to buy more of it, when the fundamentals are deteriorating. If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won't get bored.

George Soros
George Soros is popularly known for his Contrarian Attitude. He ascribes his own success to being able to recognize when his predictions are wrong. I'm only rich because I know when I'm wrong... I basically have survived by recognizing my mistakes. I very often used to get backaches due to the fact that I was wrong. Whenever you are wrong you have to fight or [take] flight. When [I] make the decision, the backache goes away On Black Wednesday (September 16, 1992), Soros's fund sold short more than $10 billion worth of pounds sterling, profiting from the Bank of England's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency. Finally, the Bank of England withdrew the currency from the European Exchange Rate Mechanism, devaluing the pound sterling, and Soros earned an estimated US$ 1.1 billion in the process. He was dubbed "the man who broke the Bank of England."

John Maynard Keynes

John Maynard Keynes was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice. He advocated interventionist government policy, by which governments would use fiscal and monetary measures to mitigate the adverse effects of business cycles, economic recessions, and depressions. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. History says John Maynard Keynes British economist as one of the best speculators and investors who lived during Great Depression and World War I & II. After Sub-Prime crisis the global economy is following Keynesian economics among various policy makers from the world's industrialized economies. This included discussion and implementation of economic policies in accordance with the recommendations made by John Maynard Keynes in response to the Great Depressionsuch as fiscal stimulus and expansionary monetary policy.

Keynes Economist Or Investor?economist; he was an investor; he was Keynes was an

a patron of the arts and a lover of ballet. He was a speculator. He was also confidant of prime ministers. He had a civil service career. So he lived a very full life in all those ways. Keynes speculated with his personal account, invested on behalf of various investment and insurance trusts and even ran a college endowment, each of which had different goals, time horizons, and product mandates. Upon his death, he left a substantial personal fortune primarily a result of his financial market activities. Evidence of Keynes investing acumen can be found in the returns of the Kings College Cambridge endowment, the College Chest, for which he had total discretion as the First Bursar. A publicly available track record shows he returned an average of 13.2% per

Keynes Economist Or Investor? feat considering the 1929 stock market This was quite a
crash, the Great Depression, and World War II occurred over that time frame. But, like all great investors, Keynes first had to learn some difficult lessons. He was not immune to blowups in spite of his superior intellect and understanding of global markets. In the early 1900s, he successfully speculated in global currencies on margin before switching to the commodity markets. Then, during the commodity slump of 1929, his personal account was completely wiped out by a margin call. After the 1929 setback, his greatest successes came from investing globally in equities but he continued to speculate in bonds and commodities. His investment philosophy . . . changed in line with his evolving economic theories. He learned a lot of his theory from his experience as an investor and this

On Derivatives

Derivatives are financial weapons of mass destruction Warren Buffet Futures look dangerous at firstnine out of ten traders go bust in their first year. As you look closer, it becomes clear that the danger is not in futures but in the people who trade them. Futures do not kill traderspoor money management kills traders Successful stock and futures traders sometimes use options to reduce risks or protect profits. Options,, are a hope business. You can buy hope or sell hope. As a professionalI sell hope. I come to the floor in the morning and find what the public wants. Then I price that hope and sell it to them.- Professionals are more likely to write options than buy them. A serious trader uses limit orders to get in and to take profits, and protects his positions with stops. Maintain an attitude of healthy skepticism. If you find something you dont understand, try it again, and if you still do not get it, it is probably not worth having.

Money Twists Our Mind

How money can twist a players mind while teaching my oldest daughter to play backgammon. She was about eight at the time but very determined and bright. After a few months of practice she began beating me. Then I suggested we play for money a penny a point, which in our scoring meant a maximum of 32 cents per game. She kept beating me, and I kept raising the stakes. By the time we reached 10 cents a point she started losing and soon gave back every last penny. Why could she beat me playing for little or no money but lost when the stakes increased? Because for me $3.20 was pocket change, but for the kid it was real money. Thinking about it made her a little more tense and she played slightly below her peak level enough to fall behind. A trader with a small account is so preoccupied with money that it impairs his ability to think, play, and win. Alexander Elder

Investment Wisdom

Fundamental factors are very important to a long-term trader who wants to ride major trends for several months or years. If the fundamentals are bullish, we should favor the long side of the market, and if bearish, the short side. Fundamental analysis is less relevant to a short-term trader or a day-trader. Successful trading is based on the 3 MsMind, Method, Money. Technical analysis, no matter how clever, is responsible for only one third of your success. You also need to have sound trading psychology and proper money management. To be a successful trader, you have to develop iron discipline (Mind), acquire an edge over the markets (Method), and control risks in your trading account (Money). The secret of trading is that there is no secret. There is no magic password to profits. An intelligent trader pays attention to fundamentals. He is aware of the key forces in the economy. He spends most of his analytic time on technical

Investment Wisdom

A high level of education can be a handicap in trading. Brian Monieson, a noted Chicago trader, once said in an interview, I have a Ph.D. in mathematics and a background in cybernetics, but I was able to overcome those disadvantages and make money. Professionals wait for opportunities but amateurs jump in, driven by emotionsthey keep buying strength and selling weakness. Market includes some of the most brilliant minds and some of the deepest pockets on Earth. Arguing with this group is dangerous business, and it has to be done very cautiously. The main purpose of the stock market is to make fools of as many men as possible. "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."

Should We Average?

"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. "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. "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. There are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. 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

More Thoughts

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be mispriced - Warren Buffett A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul-Jesse Livermore It isn't as important to buy as cheap as possible as it is to buy at the right time-Jesse Livermore Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. Jesse Livermore Remember, it [the market] is designed to fool most of the people most of the time. I never try to predict or anticipate. I only try to react to what the market is telling me by its behavior. Greed, fear, impatience, and hope will all fight for mental dominance over the speculator.-Jesse livemore.

Alexander Elder says in Trading For A Living

Decide that you are in for the long haul that is, you want to be a trader 20 years from now. Learn as much as you can. Read and listen to experts, but keep a degree of healthy skepticism about everything. Ask questions and do not accept experts at their word. Do not get greedy and rush to trade take your time to learn. The markets will be there with more good opportunities in the months and years ahead. Develop a method for analyzing the markets that is, "If A happens, then B is likely to happen". Markets have many dimensions use several analytical methods to confirm trades. Test everything on historical data and then in the markets, using real money. Markets keep changing you need different tools for trading bull and bear markets and transitional periods as well as a method for telling the difference.

Alexander Elder says in Trading For A Living

Develop a money management plan. Your first goal must be long-term survival; your second goal, a steady growth of capital; and your third goal, making high profits. Most traders put the third goal first and are unaware that goals 1 and 2 exist. Be aware that a trader is the weakest link in any trading system. Go to a meeting of AA to learn how to avoid losses and develop your own method for cutting out impulsive trades. Winners think, feel and act differently than losers. You must look within yourself, strip away illusions, and change your old ways of being, thinking and acting. Change is hard, but if you want to be a professional trader, you have to work on changing your personality.

80/20 rule know it!

There is a theory called the Pareto Principal also known as the 80/20 rule and it goes something like this: in any human activity a few (20%) are vital and many (80%) are trivial. You wear 20% of your clothes 80% of the time 20% of stock produces 80% of sales in a normal retail store. 20% of sales people make 80% of commissions 20% of authors sell 80% of all books 20% of what you do in the day will result in 80% of your success 20% of traders take 80% of all profits from the markets.

On Market Tips

"I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgment." -Jesse Livermore The greater fool theory is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a bigger fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to some one else for an even higher price. (Penny stocks are very good example) Get inside information from the president and you will probably lose half your money. If you get it from the chairman of the board, you will lose all of your money- Jim Rogers Inside every buy, there is a sale screaming to get out.

Avoid Over-trading
Its an aptitude for the game, a stomach for the ride, and the ability to see what is happening without emotion. The ability to make observations that others dont and a good Memory.Only speculate if you can make it a full-time job. Dont take tips of any kind, no matter where they come from. Dont worry about catching tops or bottoms, thats fools play. Keep the number of stocks you own to a controllable number. Its hard to herd cats, and its hard to track a lot of securities. Take your losses quickly and dont brood about them. Try to learn from them but mistakes are as inevitable as death. And only make a big move, a real big plunge, when a majority of factors are in your favor.every once in a while you must go to cash, take a break, and take a vacation. Dont try to play the market all the time. It cant be done, too tough on the emotions.- Jesse Livermore

What If We Go Wrong?

Its not whether you are right or wrong that matters, but how much money you make when youre right and how much you don't lose when youre wrong-George Soros Benjamin Graham's the Intelligent Investor, reminds us, ''Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it- even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. In the world of securities, courage becomes the supreme virtue after adequate knowledge and tested judgment are at hand. '' Those words are as prophetic today as they were when written in 1949. "When flood comes, Fish eats ants, when flood goes, Ants eat fish, Time matters. Just hold on & let time pass by. God gives opportunity to everyone. Its how you grab them."

Common Queries From Investors

'I bought this scrip last week and it is down. Should I sell?' 'The markets are trading at a peak. Is it right to invest now?' 'I want to make maximum returns in minimum time. Suggest some stocks.' 'Which are the stocks worth buying with price less than Rs 50?' 'When will the market correct? I want to invest in some good shares.'

This kind of approach to investing in equity is a recipe for disaster. There are some serious problems here. Let's pick up some important lessons.

Lesson 1: Buy businesses, not stocks. Lesson 2: Watch business growth, not rise in stock prices. Lesson 3: The stock market is a serious long-term business, not a make-money-overnight casino. Lesson 4: Don't be fooled by others' so-called success stories. Lesson 5: Time in the market is more important than timing the market.