Trade like Jesse Livermore / Richard Smitten - OS/2 API Research

12 TRADE LIKE JESSE LIVERMORE
Figure 2.2 This chart (two of three) illustrates the precipitous fall the market
has recently experienced.
The speculator Louis Smitten defines the steps of a short sale as
follows: the sale of stock you don’t own, in anticipation of a drop in
price.
1. Stock is borrowed from your broker for delivery to your account.
2. Later, you purchase stock in the open market and return it to your
broker to pay back the stock you borrowed. This completes the
transaction.
In other words, the stock is sold first, then bought back at a later date, and
at, it is hoped, a lower price. This is the reverse of a normal buy-first, selllater
transaction.
So, the first step in the Livermore procedure before making a trade is
to determine the direction of the overall market—Livermore referred to