Buy in fear, sell in greed! : Jesse Livermore

Jesse Livermore

table of contents

• Step 1: Prediction!
• Step 2: Trend!
• Step 3: Turning Point!
• The Importance of Record-Keeping and Psychological Management!

Step 1: Prediction!

The most important aspect of the first step in investing is predicting future market trends. In this stage, you analyze market conditions and use various indicators and data to forecast how stocks or assets will move.

For example, by comprehensively considering economic indicators, corporate performance, and global issues, you can predict the future growth of a specific stock.

“Should I hold on or let go? I end up feeling conflicted and eventually shrink back. However, there is a fact that should not be forgotten.” Investing is not simply about predicting the future based on past information.

The market is a complex and intricate system, and the business environment can change rapidly. Therefore, in this stage, it is crucial to thoroughly analyze various market data and establish your own prediction model.

Step 2: Trend!

The second step in Livermore's investment philosophy is reading and following trends. The market always tends to move in a specific direction, and identifying these trends is key.

Livermore established the principle, “As long as a trend exists, follow it.” For instance, if the price of a particular stock is consistently on the rise, it would be advantageous to buy it.

However, it is essential to confirm specific patterns of price increases and understand their volatility. You should avoid selling suddenly without recognizing the trend.

Investing requires not only a strategic approach but also emotional management. Emotional reactions that often occur during the trend analysis process can lead to significant losses for investors.

If you have excessive greed and think, “Just one more time, let’s wait and see,” you are likely to see your losses expand at that moment. Therefore, it is important to maintain objective judgment at all times.

Step 3: Turning Point!

The final step is capturing turning points. It is crucial for investors to recognize the moments when established trends are consciously or unconsciously broken.

Livermore emphasized that identifying turning points is a key factor in determining the success or failure of an investment.

At this point, you need to detect signals indicating that the stock price is transitioning to a strong downward trend or returning to an upward trend.

For example, if trading volume suddenly increases and the movement of the stock price changes significantly, it could indicate a downward movement or the arrival of a new turning point.

If you can anticipate these turning points even slightly in advance, you will have the opportunity to make profits through trading.

However, this requires intuition and effort gained from long-term investment experience. Therefore, it is absolutely essential to keep records, think deeply, and derive your own conclusions.

The Importance of Record-Keeping and Psychological Management!

To succeed in investing, keeping personal records is essential beyond just trading. By recording your trades, you can assess what you are doing well and what mistakes you are repeating.

This is not just a record of numbers but a process of growth. As Livermore advised, “Maintain patience and caution,” investors must have the ability to control and analyze their emotions.

Instead of making emotional decisions to trade, you should act based on cold, data-driven judgments and strive to generate profits.

Managing psychological complexities will ultimately be the key to successful trading. Jesse Livermore's investment approach requires not just buying and selling stocks but also the wisdom to analyze and understand the market rationally.

Through the three steps of prediction, trend, and turning point, investors can build successful strategies.

If you approach investing with clear guidelines based on his principles, the possibility of achieving results will open up for you. Based on Livermore's investment wisdom, embark on the path of creating your own future growth.