Jesse Livermore - Concepts
- Thread starter Palindrome
- Start date
Basically when the market turns after a long trend and you want to switch sides. If I recall he waited until there was a 2nd top/bottom, he called it the confirmation point and then he switched. In today's term that is a doubletop/double bottom.
If you get his book in a searchable form you can search for the word pivot. Hm, strange, I have just done that on Amazon and there is no hit for "pivot". Then I got this crazy idea of googling "livermore pivotal point" and voila!:
https://jesse-livermore.com/price-patterns.html
"Whenever I have had the patience to wait for the market to arrive at what I call a Pivotal Point before I started to trade; I have always made money in my operations."
Pretty much the same as Wyckoff (they were alike in many ways in terms of application). There are tons of charts here that illustrate what to look for regarding reversals, or "pivotal points". But they require an understanding of supply and demand and how these can be detected on a chart or a ladder. I also recommend Livermore's How To Trade In Stocks, though you don't have to buy anything; there are pdfs on line.
Note: if it isn't obvious, the "test" needn't be a lower high/higher low. It can also be a double bottom or double top or even an upward or downward thrust (there's a good example here of a couple of these thrusts). The most important aspect of all this is the test and it's relationship to the climax, not it's exact position.
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Kind of offtopic to the thread, but has to be pointed out anyway in every Livermore thread:
1. He wasn't a young 20 something who just blew his inheritance so he had to kill himself. He had a long, very successful life (most people forget that quality>quantity). He was 63, hell I might not even make it there and I definitely won't have his life experience.
2. His suicide isn't a deciding factor when we evaluate his life, more like an endnote. Making a remark about his suicide is like saying "Robin Williams blah-blah-blah, suicide in the end." (Robin also had a good reason to finish his life, google it)
3. The woman whom he last married was one strange creature. ALL his previous husband committed suicides. That is some pattern there...
4. He didn't die poor. There was a small fortune left for his family in a trust, they were taken care of.
5. Later on both his son and grandson also died of suicides, so most likely the family had genetic disposition to depression.
1. He wasn't a young 20 something who just blew his inheritance so he had to kill himself. He had a long, very successful life (most people forget that quality>quantity). He was 63, hell I might not even make it there and I definitely won't have his life experience.
2. His suicide isn't a deciding factor when we evaluate his life, more like an endnote. Making a remark about his suicide is like saying "Robin Williams blah-blah-blah, suicide in the end." (Robin also had a good reason to finish his life, google it)
3. The woman whom he last married was one strange creature. ALL his previous husband committed suicides. That is some pattern there...
4. He didn't die poor. There was a small fortune left for his family in a trust, they were taken care of.
5. Later on both his son and grandson also died of suicides, so most likely the family had genetic disposition to depression.
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If an introvert man married an extrovert woman, that would be reason enough to send a man nuts.
thanks. this is interesting because I don't think Wyckoff would buy there as the price could go into a protracted trading range and from what we know these days is that to trade the big move we should wait until price has broken out of a trading range.
Maybe Livermore was happy to play the part of the accumulator and wait in the range swallowing up stock. Or maybe he would just trade the swings within the range.
Actually that is where he would buy as he preferred trading at those points and levels where demand and supply switch places, where buying pressure yields to selling pressure and vice versa. He didn't like buying breakouts because they were too obvious and often failed. Whether or not price shifts into a protracted trading range will depend on the character of the climax and the test, including the level at which all of this is taking place.
I can see how for pyramiding into a position this is ideal and why JL and RW did this.
In terms of trend maybe incorporating the higher timeframe can add weight to this ie if in an uptrend in the higher TF then a retest of a selling climax or shakeout on the lower timeframe can be a perfect place to begin to build a position
One problem is that one cannot be sure that there will be a retest and price might not ever come back.
As for incorporating higher timeframes, Wyckoff always began with the weekly chart to acquire a sense of where he was, then shifted to the daily for a more specific entry. What mattered -- and still matters -- is where the trading opportunity lies, not what "timeframe" one chooses. A test of a selling climax is a test of a selling climax, whether one is looking at a daily chart or a tick chart. The "danger point" is the same.
As to not being sure whether or not there will be a test, this is why Wyckoff liked to trade the reversal. Second best was the test. Third best -- and in his opinion the worst -- was to enter when price exceeded the intermediating swing point because this in effect advertised the reversal, inviting the amateurs to trade and encouraging professionals to fade. I personally prefer the test, but there is always a test, though one may have to be looking at a tick chart in order to see it.