Jesse Livermore

Borrowing Some Wisdom from Jesse Livermore and my Trading Statement at Week End

Hello Traders,

I hope to share with you some of my trading thoughts from the true “trading masters” as I see them.  This topic is on money management today, which is by far of the greatest concern to a small account trader.

Quote:  “… from time to time remind a man that no profit should be counted safe until it is deposited in your bank to your credit.”  – Jesse Livermore

What trading insight was Jesse Livermore saying to us?

My thought process used to revolve around taking my trading account to the biggest balance I could possibly can .. but in my humble opinion … as I get older I am noticing the wisdom of the true trading masters is more and more correct.  It is most like figuring out how smart your parents truly are after you get over your teenage years.

So how have I applied this trading principal to my personal trading account?  What this means to me today is to have a set number in your trading account to take money off the table and bring it to your personal bank account.  With a starting trading account balance of $2,500.00, my first goal is to bring my trading account to $3,750.00.  This translated out to 1/2 of the starting trading account balance or a gain of $1,250.00.

Now the question is how much should you remove and count as a profit?  My thought process has brought me to the conclusion that 1/2 of the trading gain should be withdrawn back to your bank account.  This would mean an amount of $625.00.  Preferably, deposited into your LLC you should form as a trader or transferred there.  Of this amount, I will then subdivide it again into 1/2.

To be divided as follows:

  • 1/2 Back to Trading Reserves = $312.50
  • 1/2 Personal Uses = $312.50

Of the 1/2 for Personal Uses or the $312.50:

  • 10%  God/Donation/Charitable Giving
  • 10%  Saving
  • 10%  Spend
  • 10%  Repay/Loans
  • 60% Living Expenses

Now, with that being said, you can adjust your percentages to your own financial condition.  But in the beginning it is about surviving to trade another day.  The majority of the trading account withdraw should be deposited into a reserve fund in case of emergency to be sent back to your trading account, if needed.

The other 1/2 of your trading account gain is simply an example I am showing.  You can adjust your percentages to your own life as you see fit.  You may need more or less in living expenses.  But I would suggest the above as the model to use, and then adjust to your own financial situation.  This is something I had learned from the book, “The Richest Man In Babylon,” many years ago, and applied to my life as a trader.

So my next STAB (Starting Trading Account Balance) after the withdrawal/wire out will be around:  $2,500.00 + $625.00 = $3,125.00.

My next target in my trading account will be to bring my trading account balance to $4,687.50, which is 1/2 of the STAB of $3,125.00 or $1,562.50 added to the trading account to bring it to $4687.50, then another wire out in my trading account in the amount of $781.25, which is once again 1/2 of the total trading account gain.

And so on … and so on … etc … etc … etc …

At the end of 10 STABs, your trading account balance should be around $23,283.00.  You would have withdrawn a total of $20,783.00, 1/2 of this amount back to your trading reserves, and 1/2 to your living portion.

March 9th, 2012:  Trading Account Statement (week end)


Good Trading,

David “Tiger” Knight

About The Author

David M. Knight

I am a 30 Year Futures and Commodities Trading Veteran. In addition, I enjoy games of skill and chance like: poker, craps, blackjack and roulette. During my professional career, I have developed and implemented successful trading strategies and methods; along with winning systems in games of skill and chance. Join with me on our mutual journey together.

  • John says:


    That is brilliant…

    Also glad to see you allow 10% for God or charity etc.

    Whilst I am in Australia (currently) and you are in America, I have just come back from Jakarta, Indonesia. There the poverty is heart wrenching!
    I see so much need for people who are just trying to survive.
    While we sip on our soy/decaffe/lattes, spare a thought for those who have nothing.
    I saw a little street boy sleeping on the ground. He had 2 little toy trucks and a few marbles near his head on the dirty ground. He had no shoes but had sores on his feet.

    Let trading make a difference in our lives but importantly, let it make a difference for others too.



  • TradeCraze says:

    Yes John, the older I get the more I understand. Life is not and if-then type of an arrangement as a Christian. Everything we have has been given to us by a great God. When we give we are simply returning what we have been given by a mighty God.

    Great comment … enjoy your post and comments.


  • Han says:

    Good thoughts John, and good performance out of the chutes Tiger. My weakness has been following the tight discipline of early profits with looser discipline and losses. Though mentally guarding against it, it appears I may be subconsciously willing to take on more risky, impatient positions because I’m “ahead” at the time. I’m praying you’ll be able to maintain a detachment from past performance when entering and exiting current trades and demonstrate the fearless, unexcitable disciplines of success in a stellar comeback the ultimately helps fund the end of other’s suffering.

  • […] can safely do this on your wins in your trading account using the STAB Money Management Method way of approaching your trading.  For instance, I have already withdrawn $625 at this point in […]

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