Five Timeless Rules of Investing Learned From Jesse Livermore

1.  “My greatest discovery was that a man must study general conditions, to size them up so as to be able to anticipate probabilities.”  What did Livermore mean by “general conditions”?  He meant the macroeconomic environment and geopolitics.  Are they favorable or not favorable to buying stocks?  Today, the Fed is raising rates and squeezing the money supply (the monetary base declined last month for the first time in years; a year ago, it was going up 10%.)  The war in the Middle East is heating up.  These general conditions are not conducive to a bull market, except for gold!

2.  Learn from wise old men who have experience in the markets.  In Reminiscences of a Stock Operator , the author talks about “the Old Turkey,” a “very wise old codger” who counseled Jesse Livermore on making good investment decisions and avoiding mistakes.  How can you do this?  The best way is to read histories of the great investors such as Warren Buffett, Peter Lynch, John Templeton and J. Paul Getty.

3.  Learn your strengths and weaknesses.  “We’ve all got a weak spot.  What’s yours?” asks the Old Turkey.  A good question that we must all answer.  “Study mistakes,” he counsels.  You don’t learn from your successes, only from your mistakes!

4.  Always save some of your gains.  “I was again living pretty well, but always saving something, to increase the stake that I was to take back to Wall Street.”  Unfortunately, Livermore made the mistake of not living up to his own advice.  He leveraged himself too much, and often went bankrupt.  By taking some of your gains and investing the funds in alternative investments, such as real estate, art and collectibles, or gold coins, you protect yourself in case you are wrong.

This reminds me of something that happened to me many years ago.  I had made a $2 million profit on a penny stock and my wife sat me down and insisted I pay off the mortgage, which was sizeable.  I told her I preferred to reinvest the profits in more penny stocks, but she insisted, and I finally agreed with her and paid off the mortgage.  It was the best decision “I” ever made!  Had I invested the profits in more penny stocks, I would have lost my shirt, because the penny stocks went into a major bear market soon after.

5.  Beware the charismatic financial guru!  “It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind.”  Oh, how true.  I well remember the times I invested in several tax shelters that eventually went bust, because I was thoroughly convinced by a smooth talking salesman who seemed brilliant at the time.

1. 瞭解市場的大趨勢。你必須順應市場目前的走勢，並且時時張大眼睛觀察。觀察並乘勢而行；
    不要逆勢而為。
2. 在股價穿越某些阻力區，寫下新高紀錄時買進。使用試探性操作策略，測試市場的走向，並以金字塔操作
    策略，在價格上漲時加碼經營。
3. 儘速認賠出場。保護自己，不受錯誤的決定太大的影響，最多損失10%。賣出游移不定的股票，因為文風
    不動的走勢，會有機會成本。
4. 讓利潤愈滾愈大，因為最強勢的股票會繼續上漲或者下跌（擁有空頭部位時）。走勢如你所料的股票，
    務必保持耐性。縮手不動才能賺大錢。
5. 應該集中投資領先行業和強勢行業中的領先股。
6. 不輕易聽信別人的小道消息和資訊。做好自己的家庭功課，只看事實，瞭解基本面。
7. 避開便宜的股票。大波動才有大錢可賺。便宜股通常不會有大波動。

http://www.bigmap.us/sinopac/research/marvels/7-1.htm