When someone talks about trading legends, Jesse Livermore would have to be at the top of the list.
Livermore is the greatest and most successful stock market trader who ever lived.
He is the Babe Ruth of trading.
Livermore revolutionized trading by the way he read markets, analyzed leading industry groups, implemented money management, timed the market and understood human nature.
I have studied and currently use many of Livermore's methods.
The results are excellent in any market condition.
Livermore read the great market crash of 1907; he made three million dollars in one day.
In 1929 he made a profit of one hundred million dollars by properly analyzing the market.
One of the keys was Livermore's knowledge that human nature never changes as it pertains to the marketplace.
This causes the same chart patterns and trends to repeat themselves and a great market technician like Livermore took full advantage.
Money management is the secret to success when trading the markets.
Livermore knew this and would get out fast when a trade went against him.
All top traders and investors, past and present, cut their losses short.
This is the most important element in an overall trading plan or system.
The only time Livermore did not do well in the markets was when he violated his trading plan.
This is an important lesson for all.
Livermore stressed that you must treat trading as a serious business.
To be successful you are anticipating price movements in the market.
A good trader will have the patience and always wait for the market to confirm their analysis.
The key is to wait for the action of the market to confirm your judgment.
Other important points Livermore knew and followed was that real money is made trading, when your stock is showing a profit from the beginning.
Also, as long as your stock is acting right and the general market is right; do not be in a hurry to take a profit.
Livermore also knew to be successful you must have rules to be guided with.
In other words, you need a solid trading plan.
Livermore developed a concept called "Top Down Trading".
This was an extremely successful method used by Livermore decades ago and is just as successful in today's markets.
I use the main elements of this system in my stock picking process and the results are spectacular.
This method puts as many factors as possible in your favor before you take a position in the market.
The odds are in your favor.
This is what's called an "edge".
Here is how it works pertaining to buying or going long a stock.
First of all, you want to establish the overall current market direction.
Livermore called this "the line of least resistance".
Since most stocks follow the general market, you want the current market direction to be in an uptrend or confirmed rally.
The second element concerns the industry group of the stock you are considering.
Make sure your stock is in one of the better performing industry groups.
Better yet, the industry group has been steadily moving up in rank over the last several weeks and months.
Do not discount the importance of the sector and the industry group your stock is part of.
Approximately half of a stock's price movement is directly tied to its sector and industry group.
Another part of the Top Down process involves checking your stock and comparing it to a sister stock in the same industry group.
As an example, if your stock was Ford, you would check General Motors also.
Place the two stocks next to each other and compare their charts to confirm similar price action.
The last step in the process is the analysis of all four factors at the same time.
Check the current general market direction, the industry group, the tandem or sister stock comparison and conduct a complete analysis of the stock you are considering.
Once the overall evidence is clearly in your favor, the odds are now clearly in your favor.
That's what the Top Down approach is all about, putting the odds strongly in your favor.
This is your edge which will result in consistent profits long term.
Fortunes are made with proper trading knowledge such as this.
Livermore is the greatest and most successful stock market trader who ever lived.
He is the Babe Ruth of trading.
Livermore revolutionized trading by the way he read markets, analyzed leading industry groups, implemented money management, timed the market and understood human nature.
I have studied and currently use many of Livermore's methods.
The results are excellent in any market condition.
Livermore read the great market crash of 1907; he made three million dollars in one day.
In 1929 he made a profit of one hundred million dollars by properly analyzing the market.
One of the keys was Livermore's knowledge that human nature never changes as it pertains to the marketplace.
This causes the same chart patterns and trends to repeat themselves and a great market technician like Livermore took full advantage.
Money management is the secret to success when trading the markets.
Livermore knew this and would get out fast when a trade went against him.
All top traders and investors, past and present, cut their losses short.
This is the most important element in an overall trading plan or system.
The only time Livermore did not do well in the markets was when he violated his trading plan.
This is an important lesson for all.
Livermore stressed that you must treat trading as a serious business.
To be successful you are anticipating price movements in the market.
A good trader will have the patience and always wait for the market to confirm their analysis.
The key is to wait for the action of the market to confirm your judgment.
Other important points Livermore knew and followed was that real money is made trading, when your stock is showing a profit from the beginning.
Also, as long as your stock is acting right and the general market is right; do not be in a hurry to take a profit.
Livermore also knew to be successful you must have rules to be guided with.
In other words, you need a solid trading plan.
Livermore developed a concept called "Top Down Trading".
This was an extremely successful method used by Livermore decades ago and is just as successful in today's markets.
I use the main elements of this system in my stock picking process and the results are spectacular.
This method puts as many factors as possible in your favor before you take a position in the market.
The odds are in your favor.
This is what's called an "edge".
Here is how it works pertaining to buying or going long a stock.
First of all, you want to establish the overall current market direction.
Livermore called this "the line of least resistance".
Since most stocks follow the general market, you want the current market direction to be in an uptrend or confirmed rally.
The second element concerns the industry group of the stock you are considering.
Make sure your stock is in one of the better performing industry groups.
Better yet, the industry group has been steadily moving up in rank over the last several weeks and months.
Do not discount the importance of the sector and the industry group your stock is part of.
Approximately half of a stock's price movement is directly tied to its sector and industry group.
Another part of the Top Down process involves checking your stock and comparing it to a sister stock in the same industry group.
As an example, if your stock was Ford, you would check General Motors also.
Place the two stocks next to each other and compare their charts to confirm similar price action.
The last step in the process is the analysis of all four factors at the same time.
Check the current general market direction, the industry group, the tandem or sister stock comparison and conduct a complete analysis of the stock you are considering.
Once the overall evidence is clearly in your favor, the odds are now clearly in your favor.
That's what the Top Down approach is all about, putting the odds strongly in your favor.
This is your edge which will result in consistent profits long term.
Fortunes are made with proper trading knowledge such as this.
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