Trade Like Jesse Livermore
If you’ve read Reminiscences of a Stock Operator and are a fan of Jesse Livermore (like me) then you’re probably excited to learn of a new book titled Trade Like Jesse Livermore by Richard Smitten. This is Richard’s second book on Jesse Livermore. He is the author of the informative and entertaining Jesse Livermore – World’s Greatest Stock Trader.
In Trade Like Jesse Livermore the author attempts to explain Jesse Livermore’s complete trading system. He claims to have unlocked Livermore’s trading rules covering methodology, money management and psychology through research and interviews with Jesse’s children and daughter-in-law.
The book begins with Livermore’s trade entry techniques and a discussion on reversal and continuation pivot points. Reversal pivot points were used to identify a change in trend, while Livermore used continuation pivot points to confirm the trend. One- and three-day reversal signals are discussed, as is the way Livermore took advantage of them. The author discusses Livermore’s use of dual stops – price and time. If a stock was not behaving correctly Livermore would not hesitate to exit, even though his price stop was not activated. Livermore prided himself on being the best loser. Along with the entry and stop techniques, Livermore’s analysis of industry groups and their leaders is discussed. Following the discussion on method, the author examines Livermore’s money management system. Livermore did not wish to lose more than ten per cent on any individual stock. His method of pyramiding is also discussed. Essentially, Livermore would establish a small initial position in a stock, and add to it when the market proved his analysis correct. This saw Livermore enter at a reversal pivot point and then accumulate at continuation pivot points. Livermore called this his probing technique. By doing this Livermore ensured that when he lost, he lost small, and when he won, he won big.
The author concludes with a discussion of how Livermore maintained emotional control. Livermore thought this was his greatest challenge, – so great that apparently he attended college courses in psychology to try to improve his understanding of the human mind.
I enjoyed Trade Like Jesse Livermore. Although the chart examples could have been improved, the book is well written and presented well overall. The trading discussion is enlivened by a number of fascinating anecdotes about Livermore’s life, like his habit of being locked away one weekend each year in the Chase Manhattan vault to examine his money and review the previous trading year’s results trade by trade. Has Richard Smitten really worked out how Livermore traded? Who knows! However, if you’re a Livermore fan I’m sure you will enjoy adding this book to your trading library.
This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.
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