Jesse Livermore was one of the most successful investors of all time. He made fortunes in stocks, futures, and options and his positions were respected enough that others even wanted to copy them. Despite his many successes, Livermore faced losses too and these losses taught him some valuable lessons about investing. With his experience, Livermore was able to craft an approach that would enable investors to minimize their losses, learning from mistakes and rising from the ashes.
In his book, How to Trade in Stocks, Livermore states, “It is not possible to continuously make correct decisions. It is easier and safer to recognize the mistakes and avoid them the next time.” According to Livermore, the key to success is the recognition and avoidance of mistakes. He goes on to state that if a mistake is inevitable, it’s important that you don’t compound it by allowing your emotions to take over.
In addition, Livermore advises to play the odds. Money management is also key and, in this regard, Livermore recommends saving money when you’re ahead and losing money when you’re not. That being said, Livermore reminds us all it’s important to be disciplined and not to overleverage. Being discipline can help you avoid losses when the market turns, potentially allowing you to still come out profitably at the end of the day.
Livermore’s experience also highlights the importance of not letting losses overwhelm you. He believed that losses could be used as learning experiences and that you should never underestimate the strength of rising from the ashes. Livermore goes on to advise that “a loss is really a small blip in the larger picture.” Livermore recognized that mistakes were inevitable, but he did not allow his losses to discourage him from investing or put him into a “no-win” mentality.
Time and again, Jesse Livermore proved himself to be a shrewd investor, wise beyond his years. His advice to investors young and old emphasizes the value of teaching oneself from mistakes and not letting losses discourage you. It’s clear that Jesse Livermore has a great deal to teach us all, and his lessons on failures and rising from the ashes are as valuable today as they were decades ago.