All successful stock and commodity traders have rules for buying and selling. Many traders today still use the trading rules Jesse Livermore first devised almost a century ago. Jesse Livermore constructed his rules over several years while he learned by trial and error what worked on the markets. He was guided by one of his favorite principles: "There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."
1. Buy rising stocks and sell falling stocks.
2. Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it's rising you should be long, if it's falling you should be short.
3. Co-ordinate your trading activity with pivot points.
4. Only enter a trade after the action of the market confirms your opinion and then enter promptly.
5. Continue with trades that show you a profit, end trades that show a loss.
6. End trades when it is clear that the trend you are profiting from is over.
7. In any sector, trade the leading stock - the one showing the strongest trend.
8. Never average losses by, for example, buying more of a stock that has fallen.
9. Never meet a margin call - get out of the trade.
10. Go long when stocks reach a new high. Sell short when they reach a new low.
11. Don't become an involuntary investor by holding onto stocks whose price has fallen.
12. A stock is never too high to buy and never too low to short.
13. Markets are never wrong - opinions often are.
14. The highest profits are made in trades that show a profit right from the start.
15. No trading rules will deliver a profit 100 percent of the time.
16. Divide your capital into 10 equal parts, and never risk more than 1/10 of your capital on any one trade.
17. Use stop-loss orders and always protect a trade when you use a stop-loss order by using reasonable price limits.
18. Never over-trade and adhere to your risk management rules.
19. Never turn a profit into a loss. If you are using a stop-loss order, then raise your stop-loss so as to lock in a profit.
20. Remember, "the trend is your friend," and never buy and sell if you are not sure of the trend according to the fundamentals and technicals.
21. When in doubt, get out. Only trade when you feel confident about your trading strategies.
22. Trade in the most active markets, and refrain from the slow, inactive markets. Also, trade the most liquid contract months.
23. Your risk should be equally distributed. Trade in 2 or 3 different commodity products so as to avoid tying up all your capital in any one commodity.
24. Trade "at the market" whenever possible and try to avoid using orders with a fixed buying and selling price (except a stop-loss).
25. Establish a "surplus account" after you have a series of successful or winning trades. Your goal is to retain the "surplus account" in times of emergency or panic.
26. Never get into the market because you are anxious from waiting, and never get out of the market just because you have lost your patience.
27. Never buy just because the price of the commodity is "low", or sell just because the price is "high."
28. Never change your position in the market without a good reason. If you execute a trade, base it on a fundamental reason or technical rule. And then do not get out without a definite indication of a change in trend.
29. Do not guess where the top and bottom of the market is, but let the market prove its top and bottom.
30. Reduce your trading after your first loss; never increase or "double-up."
31. Perception is not reality. Only trade on "quality" advice.
32. Avoid the natural tendency toward increasing your trading after a long period of success or a period of profitable trades.
33. Use self-discipline as your guide when the market goes against your position. Take your loss and wait for another opportunity.
34. Never average a trading loss.
35. Avoid getting in and out of the market wrong, and getting in right and out wrong. This only leads to doubling your mistakes.
36. Avoid taking small profits and big losses.
37. Strategize according to market consensus. When too many market participants are moving the market in any one direction, the market becomes very vulnerable.
38. Only trade with genuine risk capital, and be aware of the risk of losing.
39. Do not trade when you do not understand the market. Trade with confidence and conviction.
40. Find your personal trading niche, and remain focused. Be cautious to not over extend your attention span.
41. Do not treat all markets the same. Learn to adjust the size of your positions and the frequency of your trades for different markets.
42. Look at all sides of the market. Try to understand why a buyer would buy, and why a seller would sell. This will enable you to be more flexible, and less resistant to change.
43. Ignore the minor price fluctuations and place positions with the basic trend of the market. Remember, the odds are on your side when you trade with the trend rather than try to pick trend reversal points.
44. Guessing key reversal points can be risky. Therefore, let the market tell you when it is over by a patterned reverse in direction.
45. Always remain true to your trading plan, and follow the trading style that works best for you. This may be accomplished through the help of a broker or done independently.
46. Never make a mistake without asking yourself why. Learn from your trading mistakes. If possible, keep a log of your trades - why you made them, what happened and why, etc.
47. Do not establish your trading size based solely on margin requirements.
48. Always trade within your capabilities, financial and otherwise.
49. Put your trust in the markets, and do not be afraid when they reach historic highs or lows.
50. Never underestimate the makeup and volume of the market’s participants. There's a lot of money out there!
51. Remember, the key to any plan is how well it performs over time.
52. Never let greed or fear take control over your winning positions.
53. It is very difficult to make and keep profits by becoming addicted to either the action in minor fluctuations, or to opposing the majority just to be a contrarian.
54. Declining volume usually indicates the market is not accepting higher or lower prices, and could indicate a turn.
55. A market that is topping or bottoming out does not spend much time at the extremes, so there will be little volume at these points.
56. Be flexible with your trading. This will promote your growth as a trader. Alter your plan as it suits your increasing knowledge of the markets.
57. Finally, have confidence and believe in yourself!
1. Buy rising stocks and sell falling stocks.
2. Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it's rising you should be long, if it's falling you should be short.
3. Co-ordinate your trading activity with pivot points.
4. Only enter a trade after the action of the market confirms your opinion and then enter promptly.
5. Continue with trades that show you a profit, end trades that show a loss.
6. End trades when it is clear that the trend you are profiting from is over.
7. In any sector, trade the leading stock - the one showing the strongest trend.
8. Never average losses by, for example, buying more of a stock that has fallen.
9. Never meet a margin call - get out of the trade.
10. Go long when stocks reach a new high. Sell short when they reach a new low.
11. Don't become an involuntary investor by holding onto stocks whose price has fallen.
12. A stock is never too high to buy and never too low to short.
13. Markets are never wrong - opinions often are.
14. The highest profits are made in trades that show a profit right from the start.
15. No trading rules will deliver a profit 100 percent of the time.
16. Divide your capital into 10 equal parts, and never risk more than 1/10 of your capital on any one trade.
17. Use stop-loss orders and always protect a trade when you use a stop-loss order by using reasonable price limits.
18. Never over-trade and adhere to your risk management rules.
19. Never turn a profit into a loss. If you are using a stop-loss order, then raise your stop-loss so as to lock in a profit.
20. Remember, "the trend is your friend," and never buy and sell if you are not sure of the trend according to the fundamentals and technicals.
21. When in doubt, get out. Only trade when you feel confident about your trading strategies.
22. Trade in the most active markets, and refrain from the slow, inactive markets. Also, trade the most liquid contract months.
23. Your risk should be equally distributed. Trade in 2 or 3 different commodity products so as to avoid tying up all your capital in any one commodity.
24. Trade "at the market" whenever possible and try to avoid using orders with a fixed buying and selling price (except a stop-loss).
25. Establish a "surplus account" after you have a series of successful or winning trades. Your goal is to retain the "surplus account" in times of emergency or panic.
26. Never get into the market because you are anxious from waiting, and never get out of the market just because you have lost your patience.
27. Never buy just because the price of the commodity is "low", or sell just because the price is "high."
28. Never change your position in the market without a good reason. If you execute a trade, base it on a fundamental reason or technical rule. And then do not get out without a definite indication of a change in trend.
29. Do not guess where the top and bottom of the market is, but let the market prove its top and bottom.
30. Reduce your trading after your first loss; never increase or "double-up."
31. Perception is not reality. Only trade on "quality" advice.
32. Avoid the natural tendency toward increasing your trading after a long period of success or a period of profitable trades.
33. Use self-discipline as your guide when the market goes against your position. Take your loss and wait for another opportunity.
34. Never average a trading loss.
35. Avoid getting in and out of the market wrong, and getting in right and out wrong. This only leads to doubling your mistakes.
36. Avoid taking small profits and big losses.
37. Strategize according to market consensus. When too many market participants are moving the market in any one direction, the market becomes very vulnerable.
38. Only trade with genuine risk capital, and be aware of the risk of losing.
39. Do not trade when you do not understand the market. Trade with confidence and conviction.
40. Find your personal trading niche, and remain focused. Be cautious to not over extend your attention span.
41. Do not treat all markets the same. Learn to adjust the size of your positions and the frequency of your trades for different markets.
42. Look at all sides of the market. Try to understand why a buyer would buy, and why a seller would sell. This will enable you to be more flexible, and less resistant to change.
43. Ignore the minor price fluctuations and place positions with the basic trend of the market. Remember, the odds are on your side when you trade with the trend rather than try to pick trend reversal points.
44. Guessing key reversal points can be risky. Therefore, let the market tell you when it is over by a patterned reverse in direction.
45. Always remain true to your trading plan, and follow the trading style that works best for you. This may be accomplished through the help of a broker or done independently.
46. Never make a mistake without asking yourself why. Learn from your trading mistakes. If possible, keep a log of your trades - why you made them, what happened and why, etc.
47. Do not establish your trading size based solely on margin requirements.
48. Always trade within your capabilities, financial and otherwise.
49. Put your trust in the markets, and do not be afraid when they reach historic highs or lows.
50. Never underestimate the makeup and volume of the market’s participants. There's a lot of money out there!
51. Remember, the key to any plan is how well it performs over time.
52. Never let greed or fear take control over your winning positions.
53. It is very difficult to make and keep profits by becoming addicted to either the action in minor fluctuations, or to opposing the majority just to be a contrarian.
54. Declining volume usually indicates the market is not accepting higher or lower prices, and could indicate a turn.
55. A market that is topping or bottoming out does not spend much time at the extremes, so there will be little volume at these points.
56. Be flexible with your trading. This will promote your growth as a trader. Alter your plan as it suits your increasing knowledge of the markets.
57. Finally, have confidence and believe in yourself!