The First Trend Trader?

Who was the first trend follower – and what can we learn from him?

Many would argue that the first real trend following share trader was Jesse Livermore.

The unofficial biography of Livermore was “Reminiscences of a Stock Operator”, published in 1923.  Written by journalist Edwin Lefevere, who many believe was a pseudonym for Livermore himself, Reminiscences has become the share trading classic.

Numerous quotes and principles from Livermore’s approach to trading are completely embedded today’s modern trading approaches.

Here are just a few of the pieces of wisdom from Livermore’s biography.

1. “It takes a man a long time to learn all the lessons of his mistakes.  They say there are two sides to everything.  But there is only one side to the stock market; and it is not about being on the bear side or the bull side, but the right side.”
2. “I think it was a big step forward in my trading education when I realised that when old Mr Partridge kept on telling the other customers who would ask what to buy and sell each day, well you know this is a bull market, what he really meant to tell them was that the big money was not in the small day to day fluctuations but the broader market moves.  That is it is about sizing up the entire market and its trend.”
3. “Many men become impatient or doubtful when the market takes time doing what they figured it would do.  That is why so many men in Wall Street, who are not all in the sucker class never the less lose money.  The market does not beat them.  They beat themselves because they cannot sit tight.”
4. “The average man doesn’t want to be told with likelihood that it is a bull or a bear market.  What he desires is to be told specifically which stocks to buy or sell.  He wants to get something for nothing.  He does not wish to work at his trading.  He doesn’t even want to think. You can’t trade successfully if you follow the ways of the average man.”
5. “A man will risk half his fortune in the share market with less reflection than he devotes to the selection of an automobile.”
6. “Tips!  How people want tips!  They crave not only to get them but to give them.  There is much greed and vanity in this and little to do with quality trading.”

Was Livermore the first trend following trader?  Possibly, but he was certainly the first trader to put into black and white many of the principles of successful trading that still apply today.

If you want to know why trend following trading techniques still work today, Livermore’s answer from another time still answers the question for our time.

“Wall Street never changes.  The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.”