"But my greatest discovery was that a man must study general conditions, to size them up so as to be able to anticipate probabilities." Does anyone know what general conditions means?
Ok I read the next chapter of the book and I understand what he means. If it's a bull market look only for longs.
These are probably conditions that limit business risk. Things like: recurring revenue, stable FCF generation, high returns on capital, limited competition, strong growth profile, trading at a low valuation (like 20% FCF yield, or 0.5 P/B for those looking at banks and insurers). Ever since I interned for a private investment firm that looks to acquire businesses with these criteria, I've come to appreciate security analysis. I've modified my trading style to meet these conditions, and it's actually quite low risk. I've had 50% dips in my portfolio, but overall for the past 6 years, I've been hitting over 60% annually (compounded, so over 16x return). My taxable lags my Roth, but the results are still great. Something I do differently than investors is hold at most 5 stocks at a time and may sell if I get a quick 40%+ gain within a month.
Don't forget that Livermore allegedly traded commodities in addition to stocks, so my guess as to what he means by 'general conditions' is determining what market has the most active price drivers, an example might be that a drought will cause a more lucrative trend in grains than might exist in stocks at that time.