The methodology at a glance
Livermore didn't have moving averages or RSI — what he had was an obsessive focus on price action and relative strength. His principles, translated into modern terms, form the foundation of every trend-following system in existence today.
Livermore's Trading Rules
- Trade the leading stocks in the leading groups — high RS Rating in modern terms
- Enter at pivotal points — breakouts from consolidation to new highs
- Cut losses immediately — small losses are the cost of being in the game
- Let profits run — sell when the stock tells you to, not when you have a profit
- Wait for the right moment — sitting in cash is a position
Who is Jesse Livermore
Jesse Livermore is the most celebrated speculator in market history. Starting as a teenager posting stock quotes in a bucket shop in the 1890s, he went on to make — and lose — several enormous fortunes over a career spanning four decades. His most famous trade was shorting the market during the 1929 crash, reportedly making around $100 million (over $2 billion in today's terms) in a single year.
Livermore had no formal education, no computers, no technical indicators — just a tape machine and a notebook. Yet his observations about how markets move, how leading stocks behave, and how to manage risk are so fundamental that virtually every trend-following system in existence today descends from his principles, whether the practitioner knows it or not.
Key principle: "It was never my thinking that made the big money for me. It was always my sitting." Patience and conviction — two things most Indian retail traders lack — are the real edge.
How Kasauti implements it
The Livermore button filters for stocks embodying Livermore's principles: RS Rating of 90 or higher (leading stocks in leading groups), confirmed Stage 2 uptrend, and price within 10% of the 52-week high (near pivotal breakout points). This intersection surfaces the strongest momentum names on the NSE — the kind of stocks Livermore would have traded if he were operating in India today.
Kasauti Insight · Nuances for Indian markets
Livermore's rule of trading only the leading stocks in the leading groups maps directly onto the sector rotation dynamics of the Indian market. In practical terms, this means scanning for RS 90+ stocks and then grouping them by sector — a concentration of RS leaders in a single sector (say, capital goods or renewables) indicates institutional money flowing into that group, which is exactly the condition Livermore sought.
The modern application on Kasauti: use the Livermore filter to surface the strongest individual names, then note which sectors appear repeatedly in the results. If three or four of your top setups are in the same sector, that sector is experiencing the kind of broad-based strength Livermore would have traded. If your results are scattered across many unrelated sectors, no single group is leading — a signal to be more selective or wait for clearer sector leadership to emerge.