Reminiscences of a Stock Operator (1923)

I've read this book a couple times. I like it, but it's important to understand this is not a book about a stock trader. It's a book about a problem gambler who happens to gamble on the stock market. One of the biggest trade in the book is just a hunch the character has, and they make bank because of an earthquake. Having an act of God rescue your position is not a strategy.

There's a part where he sets up a trust so that his family will money the next time he goes bust (which happens constantly in the book), and tells his wife that he will beg and plead for the money but she has to refuse him. That feels to me like the behavior of an addict capitalizing on a moment of lucidity to protect loved ones from their addiction.

The real Jesse Livermore died penniless by suicide. The book doesn't address his depression, but I think you do see it in what's not in the book. They don't really talk about the character's friends. They don't seem preoccupied with their wife or their children.

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abstractcontrol 5 hours ago | parent [-]

One takeaway from the book is that trend following strategies are really difficult to follow. Jesse Livermore had a 3 yearlong losing streak from 2011 - 2014 despite him following his rules. After the events of the book, he went short in 1929 and was reportedly worth over 100m in that time, a huge amount. Then he lost it all in the strongly mean reverting markets of the 1930s where his trend following strategy didn't work.

He was a problem gambler, but I think if we looked at top poker players of today, they'd all have some love the gamble in them. Jesse had godly tape reading skills that allowed him to beat the bucket shops at the start of his career.

After being kicked out of the bucket shops, he should have just become a floor trader and in all likelihood, he'd have had lower highs but would have fared a lot better overall. A lot of the trading cliches like cutting trading losses quickly, letting profits run, averaging up rather than down originate from this book. There is a reason people still talk about it 100 years after its publication. It's a good contender for the best trading book of all time.

	▲	maxbond 4 hours ago \| parent [-]
		All it takes to make and lose a huge fortune is capital and a high variance strategy. Whether that strategy is informed by legitimate genius is immaterial to the final outcome - you bust badly, exhaust your credit, and are unable to stay in the market and score next big the windfall which you were counting on.

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anonu 11 hours ago | parent | prev | next [-]

required reading when youre a young buck starting out on a trading desk. its a short, quick read. there's 2 key takeaways for me when comparing today's markets and those of 100+ years ago: market dynamics are essentially unchanged & human emotions - fear and greed - drive those market dynamics in the same way.

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WheelsAtLarge 10 hours ago | parent | prev | next [-]

Keep in mind that ultimately Livermore died broke. Trading stocks is a promise of wealth that's just a mirage. Smart long term investments is your best way to a wealthy future.

	▲	ValtteriL 9 hours ago \| parent [-]
		Died by his own hand, I would add.

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vajrabum 11 hours ago | parent | prev | next [-]

Supposedly this is a roman a clef about Jesse Livermore's career. There's a lot of stuff in this book that makes sense of markets in ways that pretty much no other investing book I've ever read does. Some what I remember are bucket shops, tape sense, marketing campaigns for new stocks, risk of ruin (Livermore went bust over and over), and what amounts to compulsive gambling.

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zdc1 11 hours ago | parent [-]

Honestly, nothing's changed. It's more modern; but otherwise all the same.

	▲	intalentive 11 hours ago \| parent [-]
		A big difference is central bank intervention. In the most recent Market Wizards book, the biggest gains came from traders who traded CB announcements and rumors.

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readthenotes1 10 hours ago | parent | prev [-]

The bucket shops sound like prop trading companies of today

	▲	zdc1 5 minutes ago \| parent \| next [-]
		There are many modern day bucket shops. Any CFD or "spread betting" product is just your broker taking the other side of your trade (and optionally, offsetting the risk). Prop firm "evaluations" or "accounts" are another popular one on social media. Basically anything that amounts to a side-bet rather than a trade recorded on an exchange should (IMO) be avoided, and you're putting yourself in a situation where you and your broker have an adversarial relationship.
	▲	agobineau 8 hours ago \| parent \| prev \| next [-]
		legal bucket shops is exactly what they are a market maker (MM) (citadel, optiver) etc makes money in the most part by filtering a trade from customer, and then agreeing or disagreeing with its sentiment. If you buy say msft at $480 and they think it will dip below $480 they will 'hold risk' and wait for it to dip to say $470 then execute your trade, making $10 except instead of aiming to make 2% on a single trade, they aim to make maybe 5 cents this way on a $480 stock, mostly holding for less than a few seconds, on millions of trades an hour thus, robinhood very valuable because it encouraged retail investors to have high trading volume on complex instruments. that "order flow" then sold to MM like above for fixed rates or % shares. MM are ultimately a good thing because they provide liquidity. there is always a person willing to take the other side of a trade when you click. if you trade in a boondocks stock market like singapore or new zealand you will quickly see the market run dry and you cant get out of a position
	▲	maxbond 8 hours ago \| parent \| prev [-]
		There are still bucket shops, but they call them "binary options brokers" now. If your broker only makes money when you lose money, they're not a broker, they're a casino.