Jesse Livermore, one of the best traders of all time, and John Paulson, one of the best traders of the last few years, both have a set of rules they follow religiously. Their success serves as your opportunity to expand your investment savviness.

Below are the rules of both Livermore and Paulson alongside a bit more background information on who they are (hat top Minyanville and Wsj).

Jesse Livermore

Jesse Livermore, one of the greatest investors of all time, has been featured in many investment books. The most popular was Reminiscences of a Stock Operator by Edwin Lefevre in 1923. During the course of his life he made and lost millions, going broke several times before committing suicide in 1940. These are his seven greatest trading lessons:

1. Cut your losses quickly.
2. Confirm your judgments before going all in.
3. Watch leading stocks for the best action.
4. Let profits ride until price action dictates otherwise.
5. Buy all-time new highs.
6. Use pivot points to determine trends.
7. Control your emotions.

For those investors wondering if they are emotional, we suggest reading out post 50 Ways You Know You Are An Emotional Investor.

John Paulson

John Paulson, a hedge-fund manager in New York, lead his firm to make $20 billion in profits between 2007 and early 2009. By betting heavily against first the housing market and then later financial stocks, his firm made a killing. Paulson’s success netted him a paycheck of some $4 billion, or more than $10 million a day. His funds during this time had returns of several hundred percent. These are his eight investing lessons:

1. Don’t rely on experts, be skeptical.
2. Always have an exit strategy.
3. Debt markets can do a better job predicting problems than stock markets.
4. Always educate yourself on new investment vehicles.
5. Don’t underestimate insurance (such as put options).
6. Experience counts.
7. Don’t fall in love with any single investment, keep emotions aside.
8. Don’t risk too much on any single trade, diversify risk.

By applying any of the above fifteen lessons you can take your investing game to a new level and become a better trader. Success takes time, and these rules will lead you in the right direction.

For further reading take a look through our stock education archives which houses more than 100 articles on a variety of investment topics.

As of yesterday’s Sunday report the EPIC Insights service has returned investors 27.4%. The S&P 500 over the same period has only returned 12.9%, not even half of the success of EPIC Insights.

Some of the highlight trades made by Sean between October 15th and November 15th are shared below. To view a demo issue of the Sunday newsletter click here.

Long gold/short oil – By late October, oil had been moving steadily higher and outperforming other commodities. Noting that the long-term relationship between oil and gold requires 15.7 barrels of oil to purchase one ounce of gold, the ratio of 13.3 led Sean to recommend shorting oil and buying gold in the October 25th newsletter. Since then, oil has declined slightly from $80 and gold has rallied from $1,038 to nearly $1,140, delivering subscribers impressive returns.

Short Whole Foods (WFMI) – Believing high-end retailers were likely to be hit by the combination of slowing sales and excessive valuations, Sean recommended shorting WFMI in the November 1st newsletter. When the company offered disappointing guidance a few days later subscribers saw the trade gain 15% in less than two weeks.

Short Goldman Sachs (GS) – Also in the October 25th newsletter, Sean noted a strong downtrend in the shares of that was triggered from an island reversal after GS reported earnings. Looking to profit, he recommended shorting the shares near $180 as compared to its current price around $177.

Buy Arkansas Best (ABFS) – In the November 8th newsletter Sean saw the shares of ABFS extremely undervalued and decided to buy them. Now one week later, this stock has already advanced some 8% for subscribers.

To learn more about the EPIC Insights premium please visit our website, www.epicinsights.com. Take advantage of the 30-day money back guarantee and start a monthly subscription for only $15. See you there!

Over the last two months these stocks have outperformed the market in demanding fashion. Since mid October NFLX is up 20%, AMZN is up 45%, and PCLN is up 18%.

Out of the three momentum traders will find PCLN to be in the best position to start next week off strong. It has created a beautiful bull flag. Investors looking to get in should target $204 as a good entry point. All three stock charts are below:

The only enemy for these high fliers may be the overall market. Even though the major indices have had no problem marching back up to October highs, they have done so on little volume. If the market were to roll over, the downside pressure could end the party.

While investors such as myself have retreated to cash in expectation of a market sell off, those investors still in the game could find some easy money with Netflix, Amazon, and Priceline. Buy into strength, keep the stops tight, and don’t risk what you’ll cry over losing.

With that said, if you’ll excuse me I have a flight to book, a movie to rent, and some online shopping to do. Have a great weekend!

The fundamental investor will tell you no, but the investor who feels that hyper inflation is just around the corner will most certainly answer yes.

Theories aside, the fact is that gold stocks are on the rise and you have to decide whether or not you want your portfolio involved in the bullish price action. A quick glimpse of the Spider Gold Trust (GLD) offers a good look at the recent price movement.

My point of interest is the channel highlighted in green which has been formed by a series of higher highs made since the beginning of September. The trend is your friend, and until it is broken it can easily be supported.

Benefiting from this trend are all gold etfs and stocks (mining, explorations, production, etc.).  Two stocks I personally have been watching include both Randgold Resources (GOLD) and Buenaventura (BVN). Their charts lie below.

While GOLD has been subject to intense and quick price swings while building its horizontal base BVN has experienced more one way action. Between the two I like BVN simply because of its consistency and defined support.

Three other gold stocks to consider include Iamgold (IAG), Northgate Minerals (NXG), and Eldorado Gold (EGO). Investors Business Daily currently ranks IAG as #1 amongst its peers and its 30.8% move in the last five trading sessions affirms this leadership.

And lastly for those investors who want to play the bigger trend there are the gold etfs. The Spider Gold Trust (GLD) which we featured above alongside the Market Vectors Gold Miners (GDX) are the two most popular and widely traded.

Personally I am skeptical of joining in on the gold rush because I believe that the market has topped. While there are a lot of signs that gold will move higher from here, short term I feel that a market downturn will take down gold. Thus, I cannot classify myself as either a gold hater (bearish) nor a gold player (bullish). Perhaps I am a gold mediator (neutral). Yeah, that sounds good.

For the next week Elliott Wave International is offering complete 100% free access to the full Financial Forecast Service (shown below). This includes Monday, Wednesday, and Friday Short Term Update Reports, The Monthly Elliott Wave Financial Forecast Report, and lastly the Monthly Elliott Wave Theorist Report.

My personal favorite is the Elliott Wave Theorist which breaks down the market technicals and forecasts future movement. At the moment Bob Prechter and his team believe the S&P 500 has topped out and is on its way back down to surpass the March lows!

Again being a paying subscriber of Elliott Wave myself, I can honestly say this is a sweet deal and a great opportunity to see what Bob Prechter and his team forecast for the market right now. Follow these steps to gain to maximize the free week:

1. Create a free login for club EWI.
2. Download all the issues via pdf (you will have access to the past three months so download those too).
3. Enjoy then thank me later!

Here is the link to the free week of access to Bob Prechter’s EWI forecasts. Free access is available until next week November 11th. See you there.

For those not familiar with OptionsHouse feel free to read our full review but they were rated #1 by Barron’s for Options Traders because of their flat rate $9.99 options trades. That’s right, no per contract fees at all. Furthermore, standard equity trades are just $2.95.

To take advantage of this deal, follow these steps:

1. Open a new OptionsHouse account
2. Enter promo code “FREE100″
3. Deposit atleast $3,000
4. Enjoy your free trades!

What makes this offer from OptionsHouse interesting is that the trades are good for 60 days. So for two months you can trade for free, get associated with the platform, and maximize your new account. Talk about a risk free offer.

If so you need to read the list below which consists of the 10 best ETFs based on overall return from the last month. Note: ETFs must trade atleast 50,000 shares per day to be included.

Top 10 ETFs For November 2009

1. Direxion: Energy Bull 3X, Symbol ERX, up 29.63%
2. ProShares: Ultra Oil & Gas, Symbol DIG, up 18.48%
3. Direxion: 30 Year Treasuries 3x Bear, Symbol TMV, up 16.95%
4. Direxion: Tech Bull 3X, Symbol TYH, up 14.48%
5. Power Shares DB Base Metals, Symbol DBB, up 19.52%
6. Barclays iPath ETN Oil ETN, Symbol OIL, up 12.49%
7. PowerShares DB Oil Fund, Symbol DBO, up 11.50%
8. PowerShares DB Energy, Symbol DBE, up 11.37%
9. Elements Rici Energy ETN, Symbol RJN, up 10.98%
10. Barclays iPath Copper ETN, Symbol JJC, up 10.81%

Pretty noticeable to see that the majority of ETFs are ultra etfs (2x) or triple leveraged etfs (3x). These ETFs are the most volatile of their kind and are inherently extremely risky. We suggest only trading these types of ETFs if you are an active day trader or a risk taking “son-of-a-gun”!

Research with Morningstar

To research these funds we recommend utilizing Morningstar Premium which provides fund rankings, holdings breakdowns, sector analysis, fee information, and more!

Further Reading ETFs:

• Best Online Brokers for trading ETFs
• 40 Great Inverse ETFs For Bearish Investors
• 24 Great Ultra Long ETFs For Bullish Investors
• Currency ETFs
• Water ETFs
• Alternative Energy ETFs
  
• US Treasury ETFs
• US Dollar ETFs

Some fun facts for you to consider:

• Out of the last nine trading sessions on the S&P 500, six have been distribution or heavy distribution days.
• Bye bye 20 day moving average support.
• Bye bye 50 day moving average support.
• There were 9 stocks down for every 1 up in today’s heavy volume session.

A great chart by Dave Singer also shows the massive rising wedge that has been forming (Note chart is of the Dow Jones and is from this past Tuesday, October 27th):

Click to Enlarge

These rising wedges are traditionally very bearish and this time around is no exception. It is hard to tell if the Dow closed out of this wedge formation as of today’s close so keep a close eye on this potential formation breakdown.

Also, check out the Volatility Index below which has spiked nearly 30% in the last four sessions:

I want to clarify that I am simply calling the rally since March as over and that we can see downside pressure for the short term, 4 – 6 weeks max. If we see the rising wedge collapse to the downside, MACD confirmation, etc. then that may turn this retracement into a different scenario with darker possibilities.

Overall though cash is back to being king. In fact I am back in 100% cash as of last week. Last time I went 100% cash was back in August of last year and we all know what happened after that.

Stay smart out there!