Jesse Livermore's Stock Trading Rules

Jesse Livermore's Stock Trading Rules

All successful stock and commodity traders have rules for buying and selling. Many traders today still use the trading rules Jesse Livermore first devised almost a century ago.

Jesse Livermore constructed his rules over several years while he learned 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."

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 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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