- Cut your loss quickly
- Be sure to confirm your judgement before you take your full position.
- Let your profit ride if there is no good reason to close out the position.
- The action is with the leading stocks, which change with every new market.
- Keep the number of stocks you follow limited in order to focus.
- New all-time highs are to be bought on breakouts.
- Cheap stocks often appear to be bargains after a large drop. The often continue to fall, or have a little potential to rise in the price. LEave them alone.
- Use pivotal points to identify changes in trends and confirmations in trends.
- Don't fight the tape!
He includes Livermore's 21 trading rules, which were written in 1940. Here they are:
- Nothing new ever occurs in the business of speculating or investing in securities and commodities.
- Money cannot consistently be made trading every day or every week during the year.
- Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.
- Markets are never wrong – opinions often are.
- The real money made in speculating has been in commitments showing in profit right from the start.
- At long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
- One should never permit speculative ventures to run into investments.
- The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
- Never buy a stock because it has had a big decline from its previous high.
- Never sell a stock because it seems high-priced.
- I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.
- Never average losses.
- The human side of every person is the greatest enemy of the average investor or speculator.
- Wishful thinking must be banished.
- Big movements take time to develop.
- It is not good to be too curious about all the reasons behind price movements.
- It is much easier to watch a few than many.
- 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.
- The leaders of today may not be the leaders of two years from now.
- 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.
- 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.
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