📖Jesse Livermore
Let Profits Run
Most fail by cutting winners and holding losers.
Cut losses short and let profits run. Most traders do the opposite and wonder why they lose.
🏠 Everyday Analogy
📖 Core Interpretation
Jesse Livermore treats survival as the first objective. Limiting permanent capital loss, controlling leverage, and avoiding single-point failure are prerequisites for long-term compounding.
💎 Key Insight：Human nature drives us to lock in small gains (certainty) and hold losses (hope). This is backwards. Small losses are acceptable; large ones destroy accounts. Let profits run until the trend clearly reverses. Cut losses quickly when the market proves you wrong. This asymmetry—small losses, big wins—is the key to speculation.
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❓ Why It Matters
A single large drawdown can erase years of progress. Risk control is not timidity; it is the operating system that keeps compounding alive.
🎯 How to Practice
Define downside scenarios before entry, cap position size, avoid fragile leverage, and maintain liquidity so mistakes remain survivable.
🎙️ Master's Voice
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.
Livermore warned that speculation requires intelligence, work ethic, emotional stability, and patience. Those lacking these qualities should not participate. The game is fascinating but unforgiving.
⚔️ Practical Guide
✅ Decision Checklist
- Am I prepared for this game?
- Do I have the required qualities?
- Am I treating this seriously?
📋 Action Steps
- Develop the required qualities
- Take the game seriously
- Know your limitations
🚨 Warning Signs
- Treating speculation casually
- Lacking emotional balance
- Seeking quick riches
⚠️ Common Pitfalls
Equating volatility with all forms of risk
Oversized positions without an exit plan
Using leverage to compensate for uncertainty
📚 Case Studies
1
Piggly Wiggly Short Squeeze (1924)
Livermore shorted Piggly Wiggly as it was cornered. Price was squeezed sharply higher, but he stuck to the trade as the corner unraveled.
✨ Outcome：By letting the profitable short run after the squeeze failed, he captured a large gain as the stock collapsed.
2
1907 Panic Short Positions (1907)
Sensing market weakness, Livermore built substantial short positions before the 1907 Panic. As forced liquidation accelerated, prices plunged far beyond typical corrections.
✨ Outcome：He let his winning shorts run during the panic, exiting only after a climactic selloff, earning millions and cementing his reputation.
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