The trading legend Jesse Livermore once said, “The only time to buy or sell is when the price is right”. People who took heed of this advice are seen reaping great rewards in the stock market. But even today, Livermore’s advice remains relevant, as evidenced by the story of the final episode of holding dead money positions.
This final episode of holding dead money positions involves the investor waiting it out a bit longer before making a move. The key factor here is patience. Most investors make mistakes due to their short-term horizon and end up buying at the wrong time or selling at the wrong price. This is what made Livermore unique. He was willing to wait and let the market take its course, and take profits and losses when they presented themselves.
Let’s look at an example. Suppose an investor bought a stock at $5 per share, and the market suddenly drops and the stock cost goes down to $4. The average investor would panic and start selling off, but the patient investor who follows Livermore’s advice would wait it out until the price goes back up to $5 per share. This is what is called “holding a dead money position”.
But holding a dead money position isn’t without risks. Sometimes the market may not go back up, and the investor would end up losing money. On the other hand, if the market does go up, then the investor would end up making a profit.
This final episode of holding dead money positions is a testament to how well Jesse Livermore still holds true today. His advice of “buying and selling only when the price is right” is a simple concept, but one that holds a lot of value and can benefit investors in the long run.
If you want to become a successful investor, you need to take note of Livermore’s advice. Patience is the key. Don’t succumb to impulse and always look for the right time to buy and sell. The strategy of holding a dead money position is a great way to ensure that you make the most out of your stock investments.