An extract from Jesse Livermore

  1. 7,397 Posts.
    Am reading the book on Jesse Livermore
    in pdf format thatMember cso1 put up the other day (thanks ),

    A very interesting read
    this is an extract from that book on how Jesse made an entry into a stock ,
    he sort of feels the water first which is quite clever ,
    if he was wrong with the direction his losses would be less versus buying the whole parcel in one lot


    Let us suppose, for example, that I am buying some stock.
    I'll buy two thousand shares at 110. If the stock goes up to 111after I buy it I am, at least temporarily, right in my operation, because it is a point higher; it shows me a profit.
    Well, because I am right I go in and buy another two thousand shares. If the market is still rising I buy a third lot of two thousand shares.
    Say the price goes to 114. I think it is enough for the time being. I now have a trading basis to work from.
    I am long six thousand shares at an average of 111-3/4 and the stock is selling at 114. I won't buy any more just then.
    I wait and see. I figure that at some stage of the rise there is goingto be a reaction.
    I want to see how the market takes care of itself after that reaction.
    It will probably react to where I got my third lot.
    Say that after going higher it falls back to112-1/4, and then rallies. Well, just as it goes back to 113-3/4
    I shoot an order to buy four thousand at the market of course.
    Well, if I get that four thousand at 113-3/4 I know something is
    wrong and I'll give a testing order that is, I'll sell one
    thousand shares to see how the market takes it. But suppose that
    of the order to buy the four thousand shares that I put in when
    the price was 113-3/4 I get two thousand at 114 and five hundred
    at 114-1/2 and the rest on the way up so that for the last five
    hundred I pay 115-1/2. Then I know I am right. It is the way I
    get the four thousand shares that tells me whether I am right in
    buying that particular stock at that particular time for of
    course I am working on the assumption that I have checked up
    general conditions pretty well and they are bullish. I never
    want to buy stocks too cheap or too easily.
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