A century ago, the trading maestro and speculative pioneer Jesse Livermore, who fought through his entire life in trading, relied on the fundamental rules he summarized from his trading career, even after going bankrupt four times and rising again. Some say he ultimately failed and committed suicide, which is a tragic inevitability, but it is also the sublimation of his trading principles. His failure precisely proves that even those who discover and summarize rules cannot violate these trading rules.
First, if you want to make money in speculation, you must buy and sell goods or stocks that show profit from the very beginning. If something shows a loss immediately after buying or selling, it indicates you are making a mistake. Generally, if there is no improvement within three days, get rid of it immediately.
Second, when I see a dangerous signal, I do not argue with it; I avoid it. If everything looks good after a few days, I will return. This way, I save a lot of trouble and money.
Third, remember this: when you do nothing, those speculators who feel they must buy or sell every day are laying the groundwork for your next speculation, and you will find profit opportunities from their mistakes.
Fourth, my experience is that if I do not enter a trade at the starting point of a trend, I will never gain much profit from that trend.
Fifth, when a speculator can identify the key price point and explain the performance at that point, he is already holding the winning hand from the start.
Sixth, no matter when, I always have the patience to wait for the market to reach what I believe is a key point. Only when it reaches this position do I begin to trade. In my operations, as long as I do this, I can always make money because I start trading at the mental moment when a trend just begins. I don’t need to worry about losing money; the reason is simple: I act decisively when my personal principles tell me to take action. Therefore, all I need to do is sit still and observe the market develop according to its trends. I know that if I do this, the market itself will provide me with a signal to close my position profitably at the right time.
Seventh, it is sufficient to psychologically predict the market, but never act impulsively. Wait until you receive confirmation from the market that your judgment is correct. Only then, and only at that time, can you use your money to trade.
Eighth, never average down on losses; always remember this principle.
Ninth, excellent speculators are always waiting, always patient, waiting for the market to confirm their judgment. Remember, do not fully trust your judgment until the market itself confirms your view.
Tenth, if a person intends to learn from all failures, it will take a long time. Philosophers often say that everything has two sides, but the stock market only has one side: it is not the bullish side nor the bearish side, but the correct side. Remembering this axiom is much more important than spending time learning deep techniques in stock speculation. These ten rules are what I believe to be the most guiding principles in my trading career.