Understand the breakthrough buying method of the king of speculation, Jesse Livermore, in one chart: (1) First, buy 20%; (2) If the purchase is wrong, immediately stop loss when the price drops by 10%, resulting in a loss of 2% of the total position; (3) If the purchase is correct, immediately add 20% when the price rises by 10%; (4) Add another 20% when the price rises by another 10%; (5) Finally, directly add 40%; (6) Expand the victory results and hold the position as long as the price does not drop by 10%; (7) Once the price drops by 10%, immediately sell all positions. The essence lies in finding high-probability opportunities to operate. Most of the time in the market is spent waiting, and the cost of trial and error should be minimized. However, this method is suitable for building positions in strong coins/stocks during a bull market and is not suitable for volatile market conditions. 1️⃣ What is Jesse Livermore's core investment philosophy? Let me summarize briefly: 🔺 Trend is paramount: He emphasized following market trends, believing that the market has clear bull market upward trends and bear market downward trends. Investors should identify and follow these trends, avoiding counter-trend actions. 🔺 Risk control: He valued stop-loss and fund management, setting stop-loss points for each trade to prevent losses from expanding, and reducing risk through diversification and position control. 🔺 Independent thinking and patient waiting: He advocated independent market analysis, not relying on others' opinions, and patiently waiting for suitable trading opportunities, such as price breakthroughs at key resistance levels or pullbacks to support levels. 2️⃣ Let profits run This is also one of Livermore's core investment philosophies. Once a trade starts to generate profits, he would not rush to close the position due to short-term price fluctuations or minor pullbacks. He believed that profits should grow as much as possible under the momentum of the trend, just like letting a galloping horse run freely on a track without obvious obstacles. As long as the market trend has not changed, profitable positions should be held until clear reversal signals appear. This philosophy reflects his trust in trends and pursuit of long-term investment returns. 3️⃣ Trend judgment and following the trend (a) Recognizing the big picture Livermore believed that making big money depends on the overall market trend rather than individual stock fluctuations. He actively identified major market trends and the path of least resistance, avoiding the limitations of "bull market" and "bear market" thinking. For example, in 1907, he first shorted and then went long, and in 1929, he shorted near high prices, both resulting in substantial profits. Following the trend: Buy during an upward trend, sell during a downward trend, and align with the market direction. When the market lacks a clear trend, choose to wait and act only when the trend becomes clear. (b) Timing Waiting for key points: Livermore patiently waited for critical trading points, such as when purchasing Bethlehem Steel, waiting for 6 weeks until the stock price broke through 100 points before buying. Acting after confirming the trend: Do not enter prematurely; wait for market changes to confirm the viewpoint and then act decisively. (c) Fund management and position control Tentative operations: Start with small positions, such as buying 20% of the planned position. If profitable, add positions; if losses reach a certain proportion (e.g., maximum 10%), stop loss. Avoid adding to losing positions: Do not add positions during losses to average costs, avoiding expanded losses. Diversify investments: Do not concentrate funds in one place, reducing the risk of all-or-nothing. (d) Strict stop-loss and take-profit Resolute stop-loss: Set stop-loss points, such as a maximum loss of 10% per trade, and clear positions unconditionally to prevent losses from expanding. Let profits run: When stocks rise, do not fear pullbacks; consider the reasons for the rise and avoid selling prematurely, allowing profits to continue growing. (e) Independent thinking and contrarian thinking Independent analysis and judgment: Do not easily believe rumors; rely on personal research for decision-making. After suffering losses from trusting others' advice, he became more independent and even used rumors in reverse. Contrarian thinking: Question the general market view and look for trading opportunities contrary to market consensus. (f) Managing trading emotions Stay calm and rational, avoiding greed and fear from influencing decisions. Develop strategies before trading and execute them strictly, avoiding blind or impulsive actions. 3️⃣ Livermore's successful cases (a) Operations during the 1907 stock market crash - Background: In 1907, the U.S. financial market faced a severe crisis, with the stock market plummeting. The market environment was filled with panic, banks experienced runs, and many financial institutions were on the brink of collapse. - Operation process: Livermore noticed the market's fragility and the impending collapse trend. He began shorting stocks, borrowing stocks and selling them, expecting prices to fall. As market panic spread, stock prices dropped sharply as he predicted. When the market reached a certain level near the bottom, he reversed and went long. Through this strategy of first shorting and then going long, Livermore earned millions of dollars during this stock market crisis. This demonstrated his precise market trend judgment and ability to seize opportunities for contrarian operations. (b) Bethlehem Steel stock trading - Background: At the time, the steel industry held significant importance in economic development, and Bethlehem Steel was a key company in the industry. - Operation process: Livermore was very cautious in trading Bethlehem Steel stock. He waited for 6 weeks, continuously observing the stock's price trend and market sentiment. When the stock price broke through the critical level of 100 points, he saw it as a key buying signal and decisively bought in. Subsequently, with the development of the steel industry and the company's performance improvement, the stock price continued to rise. Livermore achieved substantial profits by patiently waiting for key moments and entering after the trend was established. (c) Shorting during the 1929 U.S. stock market crash - Background: In the 1920s, the U.S. stock market experienced a massive bubble, with apparent economic prosperity hiding underlying crises. Stock prices were excessively overvalued, and market sentiment was extremely optimistic. - Operation process: With years of experience and keen insight, Livermore detected the impending burst of the market bubble. Near the peak of the stock market in 1929, he began large-scale shorting of stocks. As the market collapsed and stock prices plummeted, he earned nearly $100 million in profits. This operation is considered a classic in his trading career, showcasing his exceptional skills in trend judgment and decisive action, as well as his deep understanding of the overall market environment. At his peak, Livermore owned the most beautiful office in New York, located at 730 Fifth Avenue, complete with a private elevator. Every year before New Year's, Livermore would lock himself in his private vault for three days, sitting among millions of dollars in cash, carefully reviewing the reasons for past trading failures. His life was full of ups and downs, going bankrupt four times but always managing to make a comeback, earning him the title of a Wall Street legend. In over 100 years of stock market history, Livermore traded for nearly half a century. On November 28, 1940, Jesse Livermore, the legendary figure of Wall Street, arrived at the Sherry-Netherland Hotel in New York to identify his father's body. After looking at his father's corpse for several minutes, he broke down and shot himself in the bathroom, ending his life at the age of 63. Before his death, he left a note with scrawled handwriting: "My life is a failure." Opinions about his life vary, but one description is most fitting: "A lifetime of greatness, a body full of madness." — "Reminiscences of a Stock Operator" Let us all be inspired!