Reminiscences of a Stock Operator

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.