Is Livermore Market Key still work?
- Thread starter HunterD
- Start date
Yes, and it does not. However, the market key is a good initial framework for good automated system development. I have researched it and the issue with the market key is the states of the market now are hugely different from when Livermore was trading. Now the states are;
1) uptrend 2) downtrend 3) sideways range (the difference being the size of pullbacks and timeframe.)
Livermore was correctly differentiating a first major reaction, but his system needs tweaking.(the first reaction is usually failing!)
The market was so different back then that taking a "system" and trying to implement it today is not possible without major tweaking.
1) uptrend 2) downtrend 3) sideways range (the difference being the size of pullbacks and timeframe.)
Livermore was correctly differentiating a first major reaction, but his system needs tweaking.(the first reaction is usually failing!)
The market was so different back then that taking a "system" and trying to implement it today is not possible without major tweaking.
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his system was essentially trend following...which has worked great during certain time periods (1970s for example). I saw numerous similarities when I started researching Dennis and Eckhardt's turtle traders of the 80s who focused on commodities trending with strict rules for entry, pyramiding (adding units as they called it), and exits...worth looking into if you are interested in the subject.
Mark Minervini is another one that has developed a similar system but mainly for breakout stocks. his first two books are great especially for beginners.
Interesting Link:
Trend following does not work on stocks
Mark Minervini is another one that has developed a similar system but mainly for breakout stocks. his first two books are great especially for beginners.
Interesting Link:
Trend following does not work on stocks
but about sideways range, Livermore has included it in either (Secondary/ Natural) (Reaction/ Rally);
a major reaction, he called it Natural Reaction;
my observation is, although Livermore Market Key cannot predict the market perfectly, sometimes it still works for price development, and as he said, it was for intermediate trends, not for the major trend
any thoughts?
according to my studies on Livermore, he had different approaches, but mainly are so-called "trend following", please refer to the book written by Richard Wyckoff;
for Livermore Market Key, however, it is not about the major trend, it is for intermediate trend, and it is not mainly for breakouts, but kind of turning trend
any thoughts?
From the Livermore book...confusing as hell. Best stay away or redo using modern concepts
The idea is that the first pullback after a rally fails 70-percent or more. (depending on the strength/length of the rally.) the second pullback fails about 60 percent of the time and the move continues up or down. The 3rd pullback is about 50-50, the final reversal usually comes after the fourth sometimes the fifth pullback. Trend changes usually come after sideways trading ranges and choppy action. The Livermore book is garbage and it is very confusing, The diagram based on shows it.
Read the first five chapters of How to Trade in Stocks. Seemed common sense Trading advise. Skipped chapters 6&7. Went onto the last chapter "The Livermore Market Key". Got bamboozled so Googled and found this thread lol.
Here's the Livermore Market Key chapter in it's entirely if anyone wants a look
https://www.stevehemingway.com/the-livermore-market-key.html
Here's the Livermore Market Key chapter in it's entirely if anyone wants a look
https://www.stevehemingway.com/the-livermore-market-key.html
I think you may have flipped that around a tad.
"I repeat that the formula {The Livermore Market Key} does not provide points whereby you can make additional trades, with assurance, on intermediate fluctuations which occur during a major move. The intent is to catch the major moves, to indicate the beginning and end of movements of importance." Livermore's emphasis, not mine.
I love Livermore. He left behind many extraordinary lessons about how to operate in the stock market, as well as important lessons on how not to operate.
However, I find that all I really need is a weekly chart with volume data, and I do extremely well, not only getting into the main moves, long and short, but also finding points where I can make additional trades, with assurance, on the intermediate fluctuations.
I do not pretend to understand how to implement The Livermore Market Key. Whenever I get about 15 minutes into trying to spreadsheet a stock in accordance with Livermore's instructions, I look at the weekly chart and realize I have all I need right there.