On The Art of “Sitting” (Patience)
Livermore famously believed that the hardest part of trading wasn’t buying or selling, but waiting.
- “It never was my thinking that made the big money for me. It always was my sitting.”
- “Money is made by sitting, not trading.”
- “There is a time to go long, a time to go short, and a time to go fishing.”
- “To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate.”
- “The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street.”
On Losing Money & Risk Management
Livermore made and lost millions, and his advice on cutting losses is legendary.
- “A loss never bothers me after I take it. I forget it overnight. But being wrong—not taking the loss—that is what does damage to the pocketbook and to the soul.”
- “Never average losses.” (Don’t buy more of a losing stock to lower your average price).
- “The first loss is the smallest loss.”
- “Profits always take care of themselves but losses never do.”
- “There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win.”
On Market Trends
He was a pioneer of trend following—buying what was going up and selling what was going down.
- “A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.”
- “Remember this: there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.”
- “Buy rising stocks and sell falling stocks.”
- “Never buy a stock because it has had a big decline from its previous high.”
- “As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.”
On Human Nature & Psychology
Livermore believed the market was a reflection of human emotion, which never changes.
- “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.”
- “All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope.”
- “The human side of every person is the greatest enemy of the average investor or speculator.”
- “Patterns repeat, because human nature hasn’t changed for thousands of years.”
- “Wall Street is never obvious. It is designed to fool most of the people, most of the time.”