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Jesse Livermore :Trading Wisdom

  
Analysis, Education
  • It takes a man a long time to learn all the lessons of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.
  • I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, Well, you know this is a bull market! he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape, but in sizing up the entire market and its trend.
  • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
  • The average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground. We love volatility and days like the one in which the stock market took a big plunge, for being on the right side of moving markets is what makes us money. A stagnant market in any commodity, such as grain has experienced recently, means there’s no opportunity for us to make money.
  • A man will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.

Human error in trading: Fat fingers here to stay

  
Analysis, Education
I expect that many of us can recount times when we have entered wrong orders into the market. Perhaps when you enter a buy order, but you meant to sell. Maybe you accidentally put a zero on the end of you lot size and only realised later? Well, the phrase ‘fat finger’ is simply a colloquial way of saying, someone has made a mistake. It is said to be a fat finger. In many ways I quite like the phrase as it depersonalises what can be a very embarrassing and costly mistake. Saying a ‘fat finger’ is to blame is much better than saying , oh it was Mr Joe Bloggs who works for BNP Paribas, yes, he is the man who brought a stock to it’s knees overnight. He was thinking about the Man U vs PSG  coming up you see and just switched off for a second.
Some of the moves cause by ‘fat fingers’ can be large. In April 2018 Deutsche Bank AG accidentally transferee 28 billion euros to an outside account as part of its daily derivative dealings. Ouch. One of outhitting Korea’s target brokerages was trying to pay their employees 88 cents per share in dividends in April 2018. However, instead it gave them 1000 shares instead. That totalled about $105 billion, which was thirty times more than the company was worth. The kicker came when 16 employees sold their stock and this created a huge fall in the share price. They must have thought it was their lucky day.
Now, in many cases these errors can be reversed. However, it is hard to eradicate these types of human errors. Germany’s chief financial regulator noted in March that the majority of computer security problems were caused, not by cybercriminals, but by human ‘mishaps or mistakes’. See here for a gated link.
So, with lots of transactions on a daily basis, fat fingers are here to stay..
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