With investing, you want to buy low and sell high! With Livermore, he seemed to be opposite, sort of. He would start little with an initial position, if it made him money, he’d invest more. If it lost him money, he would sell. Therefore, he had larger gains and smaller losses. First question, is this solely for individual stocks? I think not! I like to dollar-cost average into my mutual funds. I like to buy on the down days–no need to buy on an up day, because you’re essentially buying at the high (for the day). I just can’t bring myself to adding additional funds to my mutual funds if I can see that my fund will be up 2% today! I was just curious to know others’ opinions and philosophies…
Livermore was a trader. He traded on technicals/market sentiment and long view economic insights. He was testing his positions with small wagers. Sometimes the market tells you when you’re wrong. That’s when he got out. Remember, the market is always right. Timing was part of the strategy, but not the whole strategy (in general it’s near impossible to time the market, you try to get reasonable entry/exit points based on your strategy, risk appetite etc). " I like to dollar-cost average into my mutual funds. I like to buy on the down days–no need to buy on an up day, because you’re essentially buying at the high (for the day). " How do you know it’s a down day? Relative to what? What is the general market direction? It is hard to time the market. Most people invest mutual or index funds for the long term. They buy and hold (ignore the short term fluctuations). It appears that you are trying to mix trading with long term investing, which isn’t a great strategy. Dollar cost averaging is buying $100 worth of stock at some regular interval. When the stock is $5/share you buy 20, when it’s $10/share you buy 10. All this does is ensure you buy more equity when it’s cheap, and less when it’s expensive. But you aren’t trying to time the market with this strategy.
I know if it’s going to be a down day or an up day relative to several indexes that the mutual fund tracks. It’s generally within 25-50 basis points of the actual index. Therefore, I try to put more money in when those indexes that my mutual funds follow are down. I do put the same dollar amount, not a regular intervals, but on down days.
I’m not sure you want emulate Livermore…the guy went bust twice and wound up penniless when he committed suicide. I too like to put a few bucks into MF’s when I see the indices down 1.5-2%. Though you can never pick a bottom or top, buying things when the are cheap and selling them when they are dear is a strategy that has worked well for patient and confident investors and I bet that trend will continue.