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Mastering the Art of Trading: Lessons from Jesse Livermore

Livermore’s distinction between speculators and investors sets the tone for his trading philosophy. In one of his most famous quotes, Livermore said, “Speculators buy the trend; investors are in for the long haul; they are a different breed of cats.” This distinction between speculation and investing is one that is still debated today.

Another insightful lesson from Livermore is to give up trying to catch the exact tops and bottoms of market movements. Attempting to catch the “last eighth” (the very end of a trend) or the “first eighth” (the beginning of a new trend) can be costly and risky. Waiting for a clear trend to establish itself is a more prudent approach, as it minimizes the risk of being on the wrong side of the market.

The analogy of snapping the stem of a wineglass while a loaded pistol is pointed at one’s heart vividly illustrates the danger of making rash and reckless decisions in the market. Livermore’s metaphor serves as a cautionary tale, warning traders against taking unnecessary risks without carefully assessing potential consequences.