More Trading Wisdom from Jesse Livermore

Hello Traders,

Today I would like to take some time to revisit again with Jesse Livermore.

Jesse Livermore

Jesse Livermore

My first conclusion is that I win when all the factors are in my favor, when I am patient and waited for all the ducks to line up in a row.  That led me to my second conclusion, that no one could or should trade the market all the time.  There are times when a trader should be out of the market, in cash, waiting.”  – Jesse Livermore

When I thought on this quote this week, I felt like a light went off in my head.  Sure, I have made a lot of money over the years as a trader, but I have given a lot of this same money back to the market.

Why is this?  Because, I find myself trading when I should be on the sidelines waiting for the next VALID opportunity.  It’s part FEAR and GREED, which are our two mortal enemies as traders.

Money Management Methods

Money Management Methods

The first thing we have to protect against is ourselves, and no money is safe until it is in your ‘safe deposit box,’ as Jesse has been quoted as saying.  My mind wondered for a bit and landed on money management.

There are so many forms of money management and position sizing models to choose from, but which one is the best one for continued growth.

Money Management Methods:

  • Martingale
  • Anti-Martingale
  • Simple
  • Fixed Ratio
  • Fixed Fractional
Or is the answer … somewhere in between?  As a small account trader, I find myself in the FEAR and SURVIVAL camp more than any other form of money management.

I would tell you any form of the best form of money management, in my opinion, is to increase in contract size on profits, and decrease on losses.  So this places us into the Anti-Martingale types of money management types.

I believe the answer lies in the Fixed Fractional, with a component of withdrawing profits as you make gains safely out of your trading account.  This is the basis of my STAB Money Management and Position Sizing, I will be demonstrating on this blog.

More to come in later posts …


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.