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Jesse Livermore’s 21 Rules of Trading

Jesse Lauriston Livermore, the famed stock market trader, also known as the “Great Bear of Wall Street” made his fortune by shorting stocks during bear markets, primarily during the 1907 and 1929 bear markets.  In 1940, he wrote down 21 rules that he lived by during his stock trading career.  The rules are as follows:

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. 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 to  the amount lost by investors who have let their investments ride.

9. Never buy a stock just because it had a big decline from its previous high.

10. Never sell a stock because it seems expensive.

11. I become a buyer as soon as a stock reaches a new high on its movement after having 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 easier to invest in a few stocks than invest in many.

18. If you are unable to make money out of the leading sectors, you are not going to make money out of the market as a whole.

19. The market leaders of today may not be the market leaders 2 years from now.

20. Do not become completely bullish or bearish just become one stock or one market sector is going the opposite direction of the market.

21. Few people ever make money on tips or rumors.  Beware of inside information.  If there was easy money lying around, no one would be forcing it it into your pockets.

Remember these are rules that Jesse Livermore traded by.  It does not mean that they are rules that you have to abide by.  As you start investing and trading in the markets, you will get a sense of your own trading philosophy and build upon it.  If you want to start trading stocks, you can check out the 10 cheapest online brokerages list we have.

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