“The Game Taught Me the Game”. Experience is Key in Trading!

Jesse Livermore was a day trader who made a fortune during the Great Depression. At the time, he placed a big short position on different assets using hundreds of stockbrokers and netted over $100 million when the market collapsed.

In this article, we will look at one of his most famous quotes:

The game taught me the game. And it didn’t spare me the rod while teaching.

- Jesse Livermore

The challenge of day trading

Trading can be an interesting and highly profitable process. Indeed, thousands of people, including James Simons have made a fortune in it. At the same time, it can be a punishing industry, where a single trade can lead to significant losses.

For example, a few years ago, after a lot of success, two investments in Herbalife and Valeant Pharmaceuticals, threatened Bill Ackman’s hedge fund. He lost over $5 billion at the time.

Similarly, several trades threatened Jesse Livermore’s career. For example, a series of trades forced him to file for bankruptcy in 1908 and 1915. Therefore, in many cases, traders go through what is known as baptism by fire.

Therefore, it is essential that you follow the right process when starting your trading journey. This process involves going through a lot of market education, learning and practicing risk management strategies, and having a trading strategy.

Trading Education

The first stage of becoming a good day trader is to focus on trading education. Here, you should focus on reading books, watching videos, and attending seminars on the financial market. You can also decide to take specialized courses, being careful not to get ripped off.

Spending time studying these materials will help you understand how the market works and the best strategies that experienced people use.

Books - Still a viable choice

There are hundreds of books about the financial market that are worth reading. A good place to start is to buy Jesse Livermore’s book, How to trade in stocks. The paperback version goes for just $5.88 in Amazon while the Kindle version costs only $3. While the book was written in the 1940s, it has excellent tips that apply to this day!

One of the best quotes in the book is:

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

You can also read books about Livermore like Reminiscences of a Stock Operator and Jesse Livermore - The Speculator King.

Reading will open up your mind on how the financial market works and how to spot opportunities. It will also guide you on how to spot opportunities and how to allocate and safeguard your capital.

Related » Evergreen Lessons from Jesse Livermore

Live Trading

Another good place to start is to watch experienced traders do their work. At DTTW™, we run TraderTV, a well-known YouTube channel where our experienced traders do it live.

In the live trading session, you will see how professional traders trade and how they allocate their funds and how they handle losses.

Create a trading strategy

As you read these materials and watch trading videos you will start forming ideas in your mind about the best strategy to use.

Some of the top trading strategies that people use are trend-following, trend reversals, scalping, pairs trading, dollar-cost averaging (DCA), and swing trading.

A good trading strategy should be easy-to-understand and apply. It should also be one that does not expose a trader to significant market risks.

Your beginner's best friend: the demo account

The best way to create a strategy is using a demo account, which is provided by most online brokers. This demo will make it possible for you to experience the live market without risking your funds.

To this end, we have also put together some handy tips you could follow to make your practice more Effective.

You should spend a few months in a demo ensuring that your strategy works in all market conditions. People who hurry up moving from a demo account to a live account tend to lose money.

The move from paper trading to live accounts is (often) fraught by pitfalls. That's why we thought you may like this guide to make the switch from demo platform to trading software.

Go live and start trading

The final stage is where you add cash to your trading account and start trading. Most day traders start their careers trading in their personal accounts. As they become more experienced, these traders then move to trading floors.

At DTTW, we run trading offices around the world where people participate in day trading on a daily basis.

If joining a proprietary trading firm - accessing our capital to carry out financial transactions- and using software with direct access to markets is among your interests, feel free to contact us.

What does this quote teach us?

This quote by Jesse Livermore has several important lessons. First, it teaches you that reading books alone is not enough. For you to succeed, you will need to get exposed to the market directly. As mentioned, a demo account will help you become a better trader.

Second, training is a never-ending process in any trader’s journey. In this, you should spend a lot of time learning and finding new ways to tackle the market. As such, you should always read books, articles, and listen to podcasts among other things.

Third, the market can be punishing at times. This means that even some of the best trades in the industry often lose money. We have seen many famed investors like Bill Ackman, Carl Icahn, and Julian Robertson lose billions.

Related » How to Become a Better Trader by Losing Money

Tips to help you in trading

There are many tips that will help you become a better trader. Some of the most important ones are:

Find a mentor - Find an experienced person to guide you in your trading journey. A mentor will help you identify your weaknesses and craft your trading strategy. Have a trading journal - A trading journal is a useful document where you write down all your trades. Be a part of a trading floor - As you start your trading career, find a trading floor and be a part of it. You will use these skills to become a better trader as you move on to start your trading firm.

Summary

In this article, we have looked at one of Jesse Livermore’s quotes on the financial market. The quote shows that while the market has significant opportunities, traders will often lose money. Even the experienced ones.

That is why continuing to improve through experience is a process that every professional trader must carry out throughout his career.

External useful resources

The 21 trading rules of the great stock trader Jesse Livermore - Traderlife