Jesse Livermore

Stock Trading Rules

Jesse Livermore’s Trading Rules

Here are the stock trading rules that made Jesse Livermore’s one of the world’s greatest fortunes. Many successful stock and commodity traders still base their methods on these rules.

Livermore constructed his rules over several years, while learning by trial and error what worked on the markets. He was guided by one of his favorite principles:

“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

Stock Trading Rules

  • Buy rising stocks and sell falling stocks.
  • Do not trade every day of every year.
    Trade only when the market is clearly bullish or bearish.
    Trade in the direction of the general market.
    If it’s rising you should be long, if it’s falling you should be short.
  • Co-ordinate your trading activity with pivot points.
  • Only enter a trade after the action of the market confirms your opinion and then enter promptly.
  • Continue with trades that show you a profit, end trades that show a loss.
  • End trades when it is clear that the trend you are profiting from is over.
  • In any sector, trade the leading stock – the one showing the strongest trend.
  • Never average losses by, for example, buying more of a stock that has fallen.
  • Never meet a margin call – get out of the trade.
  • Go long when stocks reach a new high. Sell short when they reach a new low.

Other Useful Stock Trading Guidance

  • Don’t become an involuntary investor by holding onto stocks whose price has fallen.
  • A stock is never too high to buy and never too low to short.
  • Markets are never wrong – opinions often are.
  • The highest profits are made in trades that show a profit right from the start.
  • No trading rules will deliver a profit 100 percent of the time.
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Pages

  • Home
  • Start Trading
  • Bucket Shop Trading
  • Stockbroker Woes
  • Price Patterns
  • Suckers and Lessons
  • The Complete Trader
  • Beating the Market
  • Stocks or Commodities?
  • Training a Stock Trader
  • Stock Trading Rules
  • Trading Errors
  • Speculation
  • Fundamental Analysis
  • Learning Stock Trading
  • Understanding Stock Trading
  • Average Down or Not?
  • Stock Timing
  • Market Manipulation
  • Trading Signals
  • Trading vs Investing
  • How Rich Was Livermore?
  • Losing Money
  • Career Timeline

From the Livermore Blog

  • The Stock Market Sucker Test
  • Gut Feel For Pigs - Counter Intuitive Examples
  • Accurate Stock Picks vs Precise Stock Picks
  • Five Reasons to Think Twice Before Shorting Stocks
  • Pyramiding, Locking in Profits, or Enjoying the Ride
  • Stock Trading - Wait for the Reason and Miss the Opportunity
  • Stock Market Ripples and Trading Tactics
  • Practice, Luck and Mistakes in Trading
  • Why Continue Holding Overvalued Stocks?
  • Why Continue Holding Overvalued Stocks?
  • List

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