Jesse Livermore's trading system is characterized in one short sentence: Wait for turning tides, catch the beginning of the big wave and ride the trend up, waiting patiently.
Probably his most famous quote is this: "It never was my thinking that made the big money for me. It always was my sitting."
"Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! Wait until you see -- or if you prefer, until you think you see the turn of the market; the beginning of a reversal of general conditions.
That is about all I have learned to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary.
One of the most helpful things that anybody can learn is to give up trying to catch the last eighth or the first. These two are the most expensive eighths in the world.
Everybody knew that the way to exploit a market conservatively was to take profits and buy back your stocks on reactions. And that is precisely what I falsely did in my early years, or rather what I tried to do; for I often took profits and waited for a reaction that never came.
They say you never grow poor taking profits. No, you don't. But neither do you grow rich taking a four-point profit in a bull market. You might lose your position and with it the certainty of a big killing. It is the big swing that makes the big money for you."
Jesse Livermore's investment strategy of "buy the bull market and hold" or "short the bear market and hold" resulted in a huge up and down of his capital which nearly ruined him more than once. He was great in having patience while riding the trend up. Back then the margin for trading stocks was just 10%, which allowed him to do sort of stock pyramiding with having built the pyramid up at once at the beginning. Probably he was not so great in applying an initial stop loss method to his stock pyramid, otherwise he would have done much better.
"Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend." This quote of Jesse Livermore had a tragic meaning for him personally. He committed suicide in the bathroom of a hotel. At that time he had a negative balance of 1 million dollars in his trading accounts.