A Guide To Win In The Greatest Game

Or lose depending on the side of the bet you wind up on or how long you stay at the table. If you think you can win at this game then I suggest you stop reading and go back to American Idol and massage your brain. This game is to be played with controlled tredpidation and respect. It will humble you just as you believe you have achieved success. You may think this is hyperbole but I can assure you it is from years of experience while achieving extreme lows and extreme highs. This is a cumulative experience that cannot be replicated with giving only one strategy. It is an amalgam of many techniques/strategies with some very simple rules of the game maintained throughout.

“All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis. ”
—Jesse Livermore, How To Trade In Stock

The market boils down to a game of mass psychology and how the interaction of the above elements of hope ignorance and finally fear and greed coalesce to create the perfect formula for the greatest power ever created to take your bets. There is a reason that people like Warren Buffet state he is not a market timer. Although he is and don’t let that statement fool you. His timing just isn’t in your typical swing cycle time period. It’s measured in larger cycles and tends to be more stock and macro specific. You cannot own the companies like Warren does and you cannot sit in the boardrooms and next to the Secretary of the Treasury like Warren does.

You do however have an advantage Warren doesn’t have. You can move in and out of a stock and have virtually no impact on its price moves. That is a tremendous advantage.

Each of you has an investment strategy. Does it work for you? If so then you may not want to change it. On the other hand bull or bear there are lessons that history teaches us that remain true today…..even in what may be the most highly manipulated market to date. Note I said “may be”. Throughout market history it has been VERY manipulated at times worse than others…..but ALWAYS manipulate. If you aren’t aware of this fact then you have not done your due diligence in studying the history of the game you are playing.

Jesse Lauriston Livermore (July 26, 1877 — November 28, 1940), also known as the Boy Plunger[1] and “Great Bear of Wall Street”, was an early 20th century stock trader. He was famed for making and losing several multi-million dollar fortunes and short selling during the stock market crashes in 1907 and 1929.

I keep pasting clips of Jesse on this essay. They are not for decoration. This is so that you may absorb just how little things really have changed over time. There are some constants that must be adhered to. Emotion in this market must be controlled. If you do not have the ability to look at yourself and find out what your emotional weaknesses are then this market will do it for you…even the “greatest market trader ever” could not always control his emotions or follow his own rules.

Born in Acton, Massachusetts, Jesse Livermore started his trading career at the age of fourteen. He ran away from home with his mother’s blessing to escape a life of farming his father wished him to have. He then began his career by posting stock quotes at the Paine Webber brokerage in Boston.

Livermore first became famous after the Panic of 1907 when he sold the market short as it crashed. He noticed conditions where a lack of capital existed to buy stock. Accordingly, he predicted that there would be a sharp drop in prices when many speculators were simultaneously forced to sell by margin calls and a lack of credit. With the lack of capital, there would be no buyers in sight to absorb the sold stock, further driving down prices. After the crash and its aftermath, he was worth $3 million.

He proceeded to lose 90% of that 1907 fortune on a blown cotton trade. He violated many of his key rules; he listened to another person’s advice (he preferred working alone) and added to a losing position. He continued losing money in the flat markets from 1908–1912. He was $1 million in debt and declared bankruptcy. He proceeded to regain his fortune and repay his creditors during the World War I bull market and resulting downtrend.

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor. ”
—Jesse Livermore, How To Trade In Stocks

We are entering the most critical phase of the 120 year Grand Super Cycle. The Mega cycle down phase and it is going to be brutal to market participants that are not aware of what a monster deflationary cycle will do. I encourage all of you to do your own due diligence and study this phenomenon and realize just how treacherous playing any longer in this casino is. You are welcome to blame someone else for your losses…..me…Bernanke….Obama….Blankfein etc etc….but ultimately it is your choice to play and if your emotions are to blame others in your past for your failures that have befallen you then I can assure you this market will most likely wipe you out.

Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929. Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all.

Jesse’s fortune would have amounted to anything between 10 and 13.7 billion dollars in today’s money – a remarkable feat for a self-made stock and commodities trader who traded with his own money, not other people’s. On November 28, 1940, Livermore shot and killed himself in the cloakroom of the Sherry Netherland Hotel in Manhattan.

1)portions on Jesse were taken from Wikipedia….

Read more at Great Depression 2