The above photo was taken on November 26, 1940, two days before Jesse Livermore killed himself. Even a disciplined, experienced trader can encounter the black dog within and fail to master this beast. It is necessary to always be aware that the human condition of the markets is never truly mastered without self-knowledge.
Below is a set of great rules which even Livermore was still vulnerable to breaking evidently. Making well over the inflation-adjusted equivalent of 1.3+ B USD still was not enough for the trader to die broken financially and more significantly, emotionally.
To provide context, consider this passage from the blog, Magister Investment research:
"[Jesse Livermore's] biggest trading coups were reportedly in 1906, just before the San Francisco earthquake, when he made $250.000. Then he shorted the 1907 market crash (“the Rich Man’s Panic) and made another $1 million. But his biggest payday came when he shorted the stock market in 1929 and made over a $100 million (the equivalent of over $1.3 billion in today’s dollars when adjusted for inflation)."
I believe we all have it within us to master and benefit from skills in the markets and in life, but without cultivating some self-knowledge and perspective, all that we achieve and acquire can be lost very easily. Money should be the least concern when in comes to many of our goals in life, believe it or not, if you intend to have AND enjoy the fruits of your passion, persistence and practice of your chosen field(s).
Steve Burns reposted Livermore’s trading rules that have been around for over 70 years, from Livermore's book on trading.
1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.
2. Money cannot consistently be made trading every day or every week during the year.
3. Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.
4. Markets are never wrong – opinions often are.
5. The real money made in speculating has been in commitments showing in profit right from the start.
6. As long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
7. One should never permit speculative ventures to run into investments.
8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
9. Never buy a stock because it has had a big decline from its previous high.
10. Never sell a stock because it seems high-priced.
11. I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.
12. Never average losses.
13. The human side of every person is the greatest enemy of the average investor or speculator.
14. Wishful thinking must be banished.
15. Big movements take time to develop.
16. It is not good to be too curious about all the reasons behind price movements.
17. It is much easier to watch a few than many.
18. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.
19. The leaders of today may not be the leaders of two years from now.
20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.
But there is one rule that is missing.
Here is a rule to think about, since all life is a speculation.
"No person is free who is not master of himself. " — EPICTETUS