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Nuggets of Wisdom from Jesse Livermore, Greatest Trader Ever

  • #21
  • Apr 6, 2010 5:57am Apr 6, 2010 5:57am
Quoting Sauron
It doesn't make sense to criticize yourself.
You didn't know cable will go down. You supposed it based on some analysis. The market could have gone long another 200 pips before going short.
If you trust your analysis then you know that sometimes you win and sometimes you lose and the whole point is to make more on average when you win.
Therefore I don't see where the quote from Livermore fits in. Of course you'll miss the perfect entry most of the time, so what?
The point in this case was that I was so blind with my opinion that I ignored low liquidity on holidays and even did't reduced my risk while the chances of another spike above 1.5300 were huge. That wasn't intelligent play even though analyses were nice. Intelligent play would have been to wait for monday and sell at better price or at worse price but on less risk.
  • #22
  • Apr 6, 2010 5:58am Apr 6, 2010 5:58am
Quoting blunderbuss
From Livermore himself on the first page of Chapter 1:
Well given that computers trade nowm and they didnt back then proves him wrong. Just because he said it doesnt mean its true.
Economists have forecast 9 out of the last 5 recessions
  • #23
  • Edited 6:18am Apr 6, 2010 6:05am | Edited 6:18am
Quoting markmm
I dont think you knew, you only guessed then when your guessed turned out right you thought "I must have known". Its a book about a trader who had a knack for reading the tape, he blew up many times and his skills are not applicable to todays markets.
May be not all of his skills are applicable for todays markets, because today entries are much more difficult then ever but patience and humble are always profitable and yes they are skills IMO which all of us should learn even if our blown accounts are needed for that.
  • #24
  • Apr 6, 2010 6:37am Apr 6, 2010 6:37am
Quoting markmm
Well given that computers trade nowm and they didnt back then proves him wrong. Just because he said it doesnt mean its true.
Don't computers trade according to programming given to them by people?

They may react to situations faster but they are a reflection of a trader's
risk appetite, are they not?

The computers execute the same orders faster, but they are still
an extension of the trader's mind.
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #25
  • Apr 6, 2010 6:56am Apr 6, 2010 6:56am
Quoting blunderbuss
Don't computers trade according to programming given to them by people?

They may react to situations faster but they are a reflection of a trader's
risk appetite, are they not?

[font=Franklin Gothic Medium][size=3][color=#8b0000]The...
Not if they algorithms that make the trades have been evolved by computers.
Economists have forecast 9 out of the last 5 recessions
  • #26
  • Apr 6, 2010 7:01am Apr 6, 2010 7:01am
Quoting markmm
Not if they algorithms that make the trades have been evolved by computers.
Isn't it speed and frequency which also puts them at an advantage, as well as being able to process, analyse, and react to mountains of data in a fraction of the time it would take us.

The markets themselves might not have changed much but the participants sure have.
  • #27
  • Apr 6, 2010 7:15am Apr 6, 2010 7:15am
Quoting pipmutt
Isn't it speed and frequency which also puts them at an advantage, as well as being able to process, analyse, and react to mountains of data in a fraction of the time it would take us.

The markets themselves might not have changed much but the participants sure have.
Exactly, I was making the point that its more complex than just a trader mechanizing his trading strategy.
Economists have forecast 9 out of the last 5 recessions
  • #28
  • Apr 6, 2010 7:24am Apr 6, 2010 7:24am
Quoting markmm
Exactly, I was making the point that its more complex than just a trader mechanizing his trading strategy.
Honest question: So do you believe these computer algorithms are capable of interpreting peoples reactions to fundamentals and news, judging the importance of each, and their impacts on price? I always assumed that their limit would be arbitrage and snatching quotes that are away from the market.
Living the adventure in my head.
  • #29
  • Apr 6, 2010 7:30am Apr 6, 2010 7:30am
Quoting markmm
Not if they algorithms that make the trades have been evolved by computers.
Algorithms are only good for 1-2 pips.

They are created to catch divergence between currencies pairs.
.
  • #30
  • Apr 6, 2010 7:42am Apr 6, 2010 7:42am
Quoting Leonlorenzo
Honest question: So do you believe these computer algorithms are capable of interpreting peoples reactions to fundamentals and news, judging the importance of each, and their impacts on price? I always assumed that their limit would be arbitrage and snatching quotes that are away from the market.
I don't believe they can do what you said but I don't also believe they are just good at grabbing a few pips due to their speed. They can also be used to generate strategies that would take a trader many years to test, and also monitor those strategies and deactivate/activate then as necessary.
Economists have forecast 9 out of the last 5 recessions
  • #31
  • Apr 6, 2010 7:45am Apr 6, 2010 7:45am
Quoting nasir.khan
Algorithms are only good for 1-2 pips.

They are created to catch divergence between currencies pairs.
.
So all trading algorithms or automated trading system only generate 1-2 pips? Ive heard some studip statements in my life and that is one of the best.
Economists have forecast 9 out of the last 5 recessions
  • #32
  • Apr 6, 2010 7:47am Apr 6, 2010 7:47am
Quoting Sauron
That book is great for entertaining but it will not make you profitable, neither the quotes from it. I see them simply as another useless rant on psychology and discipline which comes and goes from the Editor.
Anyone who thinks that he must read them once in a while probably is losing and needs recomforting words. Otherwise, if his approach works, why does he need this kind of motivational stuff?
I believe that there's only one truth in the market, that which a trader discovers himself.
But successful people like to associate with other successful people, and if someone is a successful trader, then by nature he'll want to communicate or at least read thoughts and anecdotes from someone as highly regarded as Livermore.

At the same time it's more than that, because likewise, successful people are always looking for a new tool, large or small, to put in their toolbox.

Quoting markmm
Well given that computers trade nowm and they didnt back then proves him wrong. Just because he said it doesnt mean its true.
I've been wondering what's going to happen now with High-frequency Trading. Will this automation destroy predictable patterns or enhance them?

Rob
  • #33
  • Apr 6, 2010 7:56am Apr 6, 2010 7:56am
Quoting Rob Mondave
But successful people like to associate with other successful people, and if someone is a successful trader, then by nature he'll want to communicate or at least read thoughts and anecdotes from someone as highly regarded as Livermore.

At the same time it's more than that, because likewise, successful people are always looking for a new tool, large or small, to put in their toolbox.



I've been wondering what's going to happen now with High-frequency Trading. Will this automation destroy predictable patterns or enhance them?

Rob
It already has if they ever were predictable.
Economists have forecast 9 out of the last 5 recessions
  • #34
  • Apr 6, 2010 8:06am Apr 6, 2010 8:06am
Quoting markmm
It already has if they ever were predictable.
I don't yet see any changes to my setups, either for better or worse - but I trade Daily and Weekly, so maybe the automated trading only affects time frames below 30 minutes.

Rob
  • #35
  • Apr 6, 2010 8:15am Apr 6, 2010 8:15am
Quoting markmm
So all trading algorithms or automated trading system only generate 1-2 pips? Ive heard some studip statements in my life and that is one of the best.
You first said algorithms right? not systems!
.
  • #36
  • Apr 6, 2010 8:17am Apr 6, 2010 8:17am
Quoting Rob Mondave

I've been wondering what's going to happen now with High-frequency Trading. Will this automation destroy predictable patterns or enhance them?

Rob
Nothing.
.
  • #37
  • Apr 6, 2010 8:36am Apr 6, 2010 8:36am
Quote
"One may form an opinion regarding a certain stock and believe that it is going to have a pronounced move, cither up or down, and eventually be correct in his opinion but will lose money by presuming or acting on his opinion too soon.
Believing it to be right, he acts immediately, only to find that after he has made his commitment, the stock goes the other way."

This quote just says everything that I made wrong on my recent lose. My position was right but my play was wrong. lol

I knew cable was going down but my impatience made me lose and miss...

The number 1 mistake in your case, i feel is that you are predicting the market. No one in this universe can predict the market.

Why to predict the market? If the price has to go from 1.5277 to 1.50, it will cross key S/R on daily basis to move down.

I know it hurts seeing cable falling down and you still incurred loss on a bearish position. But you are predicting the market and i consider it as a sign of over confidence.
  • #38
  • Apr 6, 2010 8:48am Apr 6, 2010 8:48am
Quoting Leonlorenzo
So do you believe these computer algorithms are capable of interpreting peoples reactions to fundamentals and news, judging the importance of each, and their impacts on price?
Of course not. But they would be better at doing it than most of the people who try to judge the importance of news and their impact on price.
  • #39
  • Apr 6, 2010 8:54am Apr 6, 2010 8:54am
Quoting Rob Mondave
I don't yet see any changes to my setups, either for better or worse - but I trade Daily and Weekly, so maybe the automated trading only affects time frames below 30 minutes.

Rob
It's not about time frames my friend, nothing will change the market, and the patterns, no meter technical or fundamental, they existed and will continue to exist. Patterns are just the part of this business and not really important. Far more important is our mentality.

I'm not arguing witch could be more profitable humans or computers, all I know I'll be gone far before the computers conquer the markets, (I doubt it ever will happen) so to me important is to fit my mentality to the environment that i'm working in and learn from people who managed to make big names in the same or almost the same environment. Reading Livermore helped me back in the days and I find many patterns in my thoughts and working process that he was describing century before. But that doesn't make him a doctor for everyone. The point is to find something that works for you and optimise yourself to it.

Nowadays humans are still in absolute majority on any market so to follow the leaders, even if they were computers doesn't meter, is still profitable, will always be and is possible even with just technical patterns.
  • #40
  • Apr 6, 2010 9:01am Apr 6, 2010 9:01am
Quoting kingfisher
The number 1 mistake in your case, i feel is that you are predicting the market. No one in this universe can predict the market.

Why to predict the market? If the price has to go from 1.5277 to 1.50, it will cross key S/R on daily basis to move down.

I know it hurts seeing cable falling down and you still incurred loss on a bearish position. But you are predicting the market and i consider it as a sign of over confidence.
Yes you're right it was overconfidence thats what I said, but in other words.

Theres no problems in nature only we can see situations like problems.

Thanks
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