Jesse LivermoreWikimediaJesse Livermore.
Jesse Livermore is perhaps the most famous stock trader of all-time.
Back in the early part of the 20th century, Livermore made and lost millions shorting the market.
"Reminiscences of a Stock Operator" by Edwin Lefevre, a fictionalized account of Livermore's path from small-time bucketeer to big-time stock trader, is one of the most widely-read and revered books on trading.
In the introduction to a recent edition of "Reminiscences," William O'Neil, founder of Investor's Business Daily, wrote that, "in my 45 years of experience in this business, I have only found 10 or 12 books that were of any real value — Reminiscences is one of them."
Today, many in the market know Jesse Livermore from the pseudonymous Twitter account of the same name.
And while the modern "Livermore" offers some some great market commentary, the real Jesse Livermore offered the most incisive commentary on markets, all of which still holds up today.
Back in early 2013, Raymond James strategist Jeff Saut reflected on Livermore in his weekly commentary, writing that, "Years ago I studied the tactics of Jesse Livermore, along with a number of other stock market operators, and have found many of those strategies to be as valid today as they were decades ago."
In that commentary Saut included Livermore's 21 trading rules, written in 1940.
More than 70 years later, these are rules every trader needs to keep in mind:
  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. At 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.