If you’re a student of market history there is nobody you learned more about than Jesse Livermore.

Edwin Lefevre wrote his story in the book Reminiscence of a Stock Operator, one of my favorite reads.  He was truly a man before his time, making his fortune during the days prior to the Great Depression at bucket shops and fledgling brokerages.  

His tape-reading skills were legendary and are still marveled at today.  Though he finished his career a pauper and eventually committed suicide, his legacy are the tremendous stories of wealth creation and psychological advantage during a time when nobody paid much attention to the crowd.  Further, some of the quotes attributed to him are quite useful today.  Some are below.  We can all learn from Mr. Livermore!

Here are just a few of this legendary stock guru’s ideas on trading breakout stocks in his own words:
•    “I absolutely believe that price movement patterns are repeated and appear over and over, with slight variations. That’s because humans drive the stocks, and human nature never changes.”
•    “Keep the number of stocks you own to a controllable number.”
•    “Take your losses quickly and don’t brood about them. Try to learn from them, but mistakes are inevitable as death.”
•    “Only make a big move, a real big plunge, when the majority of factors are in your favor.”
•    “Never take a capital loss of more than 10%.”
•    “Keep the wind out of your face, and when the market hits the doldrums, getting nowhere, moving sideways, then get out, take a break, have some fun, go fishing. Come back into the market when the wind has picked up again, and the sailing is clear and good.”
•    “Every once in a while you must go into cash, take a break, take a vacation. Don’t try to play the market all the time. It’s can’t be done, too tough on the emotions, there is nothing more important than your emotional balance.”
•    “Don’t take tips of any kind, no matter where they come from.”
•    “Do not be invested in the market all the time. There are many times when I have been completely in cash, especially when I was unsure of the direction of the market and waiting for a confirmation of the next move, it is the change in the major trend that hurts most speculators. They simply get caught invested in the wrong direction, on the wrong side of the market.”
•    “The stock market is the greatest, most complex puzzle ever invented and it pays the biggest jackpot.”

Three of the rules he followed included:

1.    Decide the overall direction of the market, making sure of the market’s overall trend;
2.    Probe the market by trading small positions first, rather than rushing in all at once; and
3.    Exercise patience, letting a stock’s move play out, while paying attention to all the facts, instead of emotions.