LEARN FROM GENERALS OF THE
MARKETS - PART 10
“Trading is a skill. You were not born a
great trader.” - Mike Bellafiore
Jesse Livermore lived from July
1877 until November 1940. He made (and also lost) millions of dollars of
fortunes by going short when the markets crashed in 1907 and 1929. In 1907, he
went short when he noticed a bearish trend in the market. As a result of this,
he made three million dollars. He later gave away ninety per cent of that
fortune because of some bad trading styles. This made him fell into debt.
Later, he regained his fortune during the Second World War, and began to live
an affluent life. In 1929, he saw price patterns and fundamental developments
that were like the ones that occurred in 1907. Almost everybody lost their
portfolios as the markets crashed that year, but Jesse ultimately made one
hundred million dollars because he went short during the crash. Unfortunately,
his personal life was filled with divorces, eventual failures in the markets,
and lost fortunes. Sadly enough, he ended his own life by committing suicide.
Jesse Livermore is considered by
many speculators as the greatest trader that has ever walked on this planet. He
blazed unique trails in the trading world. His valid and winning principles
have been explained in details in some books that were published about him.
Lesson
In spite of his success and
failure, we can learn good lessons Jesse:
A. The majority aren’t always right. So, don’t be afraid to be
different. Jesse Livermore made fortunes because he followed the line of the
least resistance, i.e. he followed the flow of the markets. The markets were
crashing, but many people were holding onto their long positions. That was
suicidal. Holding your positions against the trends while hoping that the
markets would turn in your favor is definitely not a good thing.
B. Jesse couldn’t safeguard his fortunes, but we can do that. If
he knew this and followed it, he mightn’t have lost those fortunes. There are
effective risk control principles that can guarantee our everlasting success in
the markets. However, this is another topic in my future articles.
C. Was Jesse really the greatest stock market wizard? To me, I
think the greatest thing a trader can do is to focus on losing as little money
as possible. We’ll always give back part of our profits, but we want to give
back as little as possible. Those who suffer minor roll-downs find it easy to
recover when the markets become favorable.
Conclusion: There are no
problems in the markets. There are no problems with trading portfolios. The
problems lie with traders and investors. You need to be versatile in the
markets. You need to know the principles that can guarantee the permanent
safety of your capital in the markets. You must get proper education. If you’ve
bad trading styles, they’d ruin your prospects prior to the time you really
move ahead. The key is to speculate on what the markets are showing instead of
what you want the markets to show. Really, pecuniary gain isn’t the most
important thing, since it comes when it isn’t thought of as much.”
This article is ended by quotes
from Jesse:
1. "As
I said before, a man does not have to marry one side of the market until death
do them part.”
2. "The
professional concerns himself with doing the right thing rather than with
making money, knowing that the profit takes care of itself if the other things
are attended to… It never was my thinking that made big money for me. It was
always my sitting. Got that? My sitting tight!"
Azeez Mustapha
Market Analyst, Trading Signals Provider and Coach
Copyright (C) ADVFN PLC
For more articles, go to: http://www.advfn.com/newspaper/authors/azeez-mustapha
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