Yesterday I did Video 0005  How to trade like Jesse Livermore: Part 2: 7 Secrets of Money Management

https://www.youtube.com/watch?v=vqNuNXdDDSg&t=69s

Please use youtube link above to see the entire video











Here are some of his secrets
1.  Trend Following,  do not trade flat or directionless stocks, cause they tie up valuable trading capital

Here is an example of a directionless stock

Now, what is a stock with good trending?

About 10% of the stock exhibit good trending,  try Michael Kors , Symbol KORS yourself, plot the graph and see the triangular chart

Secret 2:  Is it a Bull Market or Is it a Bear Market?
Here I refer to Charles Dow, founder of Wall Street Journal 131 years ago.

Secret 3:  Ten Bucket Rule, divide your trading capital into 10 buckets, each commit equal amount
 
Secret 4:   For each bucket, set a 20% stop loss
 
Here is beginning of trading cycle

Here is end of trading cycle

Out of 10 stocks, the example shows you are right 30%,  wrong 30% and neutral 40%

The profit of being right = $30
The loss of being wrong = $6  (because of 20% stop loss)

Net Profit = $30 - $6 = $24

Just look at the green-highlighted part of second spreadsheet and it shows a profit of $24

Finally, just use common sense and the Pareto Rule
80% of your profit will come from 20% of your trade,
the secret is "Let the Winner Ride, Cut the Losers quickly"
and you ride up and down the trade triangle shown

As final tribute to the brilliant Italian Mathematicians