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Reminiscences of a Stock Operator

Posted

Pros: Easy to read & forever applicable.

Cons: Haven't found a good used Hardcover edition yet...

During a losing streak that was The Year of Our Lord 2010...I scoured cyberspace looking for investment book recommendations; this book was, by far, the most mentioned, condoned, and positively reviewed.

Pre-Lefevre, I had assumed that trading had completely changed since this work was first written almost a century ago.  Now I know better.  Besides an ever-evolving ruleset, the game hasn't changed; there's just different players and different tools.  That's part of what makes this book a timeless investment classic, as it has been for generations.

If you're a trader/investor or perhaps aspiring to be one...and you haven't read this book...YOU PROBABLY SHOULD.

Posted

Pros: easy to read, funny, interesting

Cons: does not spell out the lessons all the time, you have to consciously think of how the lessons relate to 2011 and your trading strategy

This classic has stood that the test of time. It was written beyond its time and to some degrees I think it touches subjects that we still do not comprehend as a group of investors.


For example, Livermore says you can't go broke taking a profit, but you can't get rich taking one prematurely either. Most traders are hopeful their losses will turn around and fearful that their paper profits will evaporate. However, Livermore says that you should be fearful that your losses will increase and be hopeful that your winners keep running. So simple yet it takes so much discipline that few people do it... especially the latter.

The whole book is like an adventure more than a boring trading book. Livermore blows his account out multiple times, gets banned from a bunch of places, gets double-crossed and almost always burns someone trying to weasel him out of his money.

My favorite thing about Livermore is that he does all the thinking and decision making when it comes to making money or as he calls it, he "plays a lone hand". He doesn't concern himself with tips, analyst or what everyone else thinks. He creates his theories and accepts full responsibility for his P/L

Livermore's self-evident interest in what he calls manipulation towards the end of the book was eye-opening too. He doesn't partake in manipulation such as spreading lies through the media (although one of his stories hints otherwise lol) but because of his notoriety and the size of his trades, Livermore often had to manipulate the tape so that he could unwind his huge positions. To Livermore, manipulation is merely creating a favorable set-up for speculators to take the reigns and drive prices higher. For example, he would constantly buy the dips in a stock he owned to create the illusion of an inability for the stock to sell off. Then when other parties notice how 'strong' the stock was and started bidding it higher, he would sell his shares to the people that were speculating. One of a few very clever ideas presented in the book.

One of the themes that really stood the test of time was his discussion on the average investors. Some of the stuff he said made me laugh out loud because it sounds like something lifted straight off of HSM.

Regarding public sentiment, Livermore was often blamed for price changes in commodities that he wasn't even trading, simply because the public has an insatiable need to find out the ‘reason’ behind a price drop and the media will fill that need by any means necessary. Livermore states, "When there is activity, there will follow the public's demand for explanations" It is the same game today. I think the average person who trades for a while notices how irrelevant most reasons for stock movements actually are, but I still see a lot of people buying into these theories and confusing correlation and causation.

 

I checked out a copy from the local library but it is a great read and well worth adding into your personal library.

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Reminiscences of a Stock Operator
Description:

Of the eight books authored by Edwin Lefèvre his Reminiscences of a Stock Operator is considered a must-read classic by most anyone involved in the American financial community.No illustrations.

Details:
DetailValue
AuthorEdwin Lefevre
BindingKindle Edition
LanguagesEnglish
List Price$3.99
Product GroupeBooks
Product Type NameABIS_EBOOKS
Publication Date2010-02-01
TitleReminiscences of a Stock Operator
FormatKindle eBook
Additional Information
Models:
Model Name/TypeMPNEAN/UPC
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