Saturday, March 16, 2013

Sit tight to make big money

There's not a lot to say about the trend shown below on this UK stock. Had you taken the long signal given right at the end of December, you'd currently be sitting on an approximate +17R profit. A classic example of one of  Jesse Livermore's famous quotes:

"After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!"

"It is no trick at all to be right on the market. I've known many [traders] who were right at exactly the right time, and began buting or selling stocks when prices were at the very level that should show the greatest profit. And their experience invariably matched mine; that is, they made no real money out of it. [Traders] who can both be right and sight tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make the big money."


  1. That is one of THE great quotes. But with the NMC example what would have been the signal? It didn't hit a 1-year high (230ish)until end of January (still a nice trade I guess). December was only a 2 or 3 month high - wouldn't you get 100s of these every time you scan the market - how to filter them except by manually trawling through? Thanks.

  2. Each trend system has its own parameters to determine when to get in and out of a position (usually an x day high or low - x being one the parameters chosen by the trader). There can be more one trend in place at a time - for example, on a daily chart there may be an uptrend, on the weekly chart there may be a downtrend etc.

    I use scans which tell me those that meet my criteria (including a trend filter). From there it is a question of the 'look' of the chart, the current volatility in that stock or instrument, as well as other considerations like the spread etc. As Ed Seykota states in his MW interview 1) the long term trend 2) the current chart pattern 3) picking a good spot to buy or sell (the breach of the x day high or low).

    In addition if a stock is already extended in an existing trend they would be excluded from the scan results.

    Hope this helps.