The Pits That Livermore Stumbled Upon 80 Years Ago: Insights for Traders
The insights for traders can be summarized in three simple points:
1. Don't be too eager every day.
2. Make money—take it to safety.
3. Lock your emotions in a cage.
Remember: The most dangerous thing is not the market, but yourself.
Livermore—Late Life Interview
"I went bankrupt four times in my life and bounced back four times; before my death, I left three bloody lessons for speculators."
1. Big money doesn’t come from taking risks, but from waiting for major trends
"Ignoring small fluctuations and trying to jump in and out is a fatal mistake for me. No one can capture every rise and fall. In a bull market, your approach is to buy and hold tightly until you believe the bull market is about to end."
2. Lock half of your profits in a safe
"I recommend saving 50% of your profits; if you make 100% profit, you should do this even more... It’s like winning money at a casino and exchanging the chips for cash. My greatest regret in my financial career is not paying enough attention to this principle earlier."
3. Manage emotions first, then manage positions
"A speculator's greatest enemy is not the market, but themselves. When emotions are out of control, any rules will be thrown out the window. Expand your positions gradually and increase your investment step by step, rather than going all in at once; set your stop loss within 10%, rather than fantasizing that the market will turn around. Controlling emotions is something I have to learn throughout my life."
Insight: Livermore's 'three bloody lessons' from 80 years ago are even sharper today in the era of high-frequency quantitative trading and 24-hour trading, because its core contradiction—human nature vs. technology—has never changed. The more advanced the technology, the more it requires Livermore-style 'discipline and patience' to counteract the acceleration of human nature.
