If you have been trading for awhile now, you’ve realized that many successful traders have a set of rules to guide them. This takes the emotion out of trading and puts your mind at ease by giving you a reference to justify your actions. Trading markets can be difficult with so much “noise”. News releases, rumors, and other traders whispering stock tips in your ear. Below is a set of trading rules written by the legendary stock trader Jesse Livermore. These rules are timeless and have stood the test of time despite being written long ago. Take time to understand each rule in depth. While some may be a bit vague, it is only so it can be applied in a general sense to cover the whole concept of trading stocks.
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21 Trading Rules by Jesse Livermore
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 judgement 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. As 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 ha a big decline from its previous high.
10. Never sell 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 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.