Jesse Livermore's Trading Rules
Known as the 'Great Bear of Wall Street,' Livermore made (and lost) several fortunes. His rules, written in the 1940s, remain strikingly relevant today.
Who was Jesse Livermore?
Jesse Livermore (1877–1940) was one of the greatest traders in history. He shorted the 1907 panic and the 1929 crash, at one point amassing a fortune worth over $100 million in today's dollars. His book Reminiscences of a Stock Operator remains required reading for serious traders.
Livermore's essential principles
Cut your losses quickly
Never let a loss exceed 10% of your capital on any trade. The market doesn't owe you a comeback.
Let your winners run
Don't sell a stock just because it's risen. Strong stocks tend to go higher than anyone expects.
Never average down
Adding to a losing position is a losing strategy. If you're wrong, get out.
Wait for confirmation
Don't buy on hope or sell on fear. Wait for the market to confirm your thesis with price action.
Trade with the trend
The big money is made by sitting and riding the major trend. Fight the trend, and the trend always wins.
Cash is a position
Sometimes the best trade is no trade. Patience is the hardest part of trading.
The psychology of markets
Market psychology
Markets are driven by two emotions: fear and greed. The successful trader exploits both.
Timing matters
Being right about a stock but wrong about timing is the same as being wrong.
Beware of tips
If a tip was worth anything, it wouldn't be given freely. Do your own analysis.
Learn from losses
Every loss teaches something. The traders who survive are the ones who learn.
Livermore's trading method
He identified 'pivotal points' — price levels where a stock's direction would likely change.
| Signal | Action | Risk Level |
|---|---|---|
| Breakout above resistance | Buy with tight stop | Low |
| Break below support | Sell or short | Low |
| High volume + new high | Add to position | Medium |
| Reversal on heavy volume | Exit immediately | High |