You’re right about using pivotal points to take decisions – “The correct time to sell is after the uptrend has broken”.

Jesse Livermore didn’t always adhere to this tactic himself. When he was “swinging a big line” – in other words he had pyramided into a situation in a big way – he would take his profits when he could. He would exit from his biggest trades when there was high volume in the market, enabling him to unwind his position without pushing the market in the wrong direction. It’s still a consideration today for traders who take biggish positions in thinly traded penny stocks. How can they get out without depressing the price? Easy, generate volume to sell into by ramping – talking-up – their stock on bulletin boards and the like.

Like your friend, I know from experience that selling during an uptrend can apparently work but, unless there’s a logical reason for doing it – that can be used again – it’s the wrong thing to do and, long-term, will lose money, because you’ll not be maximizing profits on your successful trades so that they comfortably exceed your losses on unsuccessful trades.

I took a quick look at DNDN on Yahoo Finance.

The overnight jump it took between closing at $5.22 on March 29 and opening at $17.92 on March 30 is pretty dramatic. Do you know what your friend’s reasons and timings were for getting into and out of the trade?

Thank you for the great article!

My question would be, if we are strictly adhering to Livermore’s rules, wouldn’t we be using pivotal points as to when to sell and take a profit. Or use a pivotal point in the upward direction to increase a position??

I very much like this concept, but I don’t believe it always works..a friend of mine recently took a position in DNDN and sold off part of his shares during a blip.. this was a very smart move because he now has those profits and can still ride the stock if it hits new highs..

Thanks again.