How to Trade in Stocks by Jesse L. Livermore gives today’s trader a vivid glimpse into the history of technical analysis. Fortunately for those of us who read this book, our guide is Livermore and the glimpse we are afforded is into his mind and into his trading formula. How to Trade in Stocks was published in 1940 and was Jesse Livermore’s contribution to the world that had both made and lost him fortune after fortune. To describe this book as short would be accurate, but only as it describes its length, not its stature. Contained within the 90 or so pages is a myriad of trading experiences and stories described by Livermore. He exhibits no awkwardness when describing a blunder, nor is he bashful when making a point: “Never average losses. Let that thought be written indelibly on your mind,” he says to close a chapter.
Some of his rules include:
Always trade with the trend, along the line of least resistance.
Make sure all the factors are in your favor before you make a trade.
Stay with the leading stocks of the day Group action is a key to timing – Stocks do not move alone.
Don’t buy your entire position at once. Always have a stop before you get in a trade.
Never takes tips from anyone Never argue with the tape.
You should not be in the market all the time.
One of the things that helped me was that after a large successful trade, the author recommends taking half the profit out of the market.Put it away somewhere safe.