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Thoughts on Reminiscences of a Stock Operator

  
  Education
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Dear Reader/Traders….If u had not Read this Book…then u had not read anything……its a Bible …Buy and Read atleast once ………..

One of the fascinating things in Reminiscences of a Stock Operator is the constant interplay between duplicit and dishonest practices of Livermore himself and the crooks he deals with. It reminds one of the crossroaders book where the two best friends cheat each other with a mechanical mirror and other means in constant games between them. Only when they realize that the stake between them keeps getting smaller do they realize that they’re both getting poorer because they have to pay the third crook, the “mechanic” for the use of the mirror. The rake was constant. They both show no compunction about cheating their best friends until they realize they’ve been viged to death by a third party.

Livermore is constantly appalled that in the nefarious schemes of manipulation and cornering that the holders of worthless securities engage in with him, that his customers have no honor among mutual thieves like the crossroaders. His terms for a manipulation are as follows: suppose the manipulators have 200000 shares of a listed stock at 40. Livermore will take call on all 200000 shares of stock at 40 for 1 year. They will also put up 6 million in cash for him to make a market and engage in his own insider trading with.

I doubt that the two most wealthy fellow travelers themselves and friends of the Oval who engage in such transactions with the triangle of their colleagues in the banking, and legislative branches receive such favorable terms or insider information today, albeit they seem to have more influence on the terms and policies.

In any case, how would you value what Livermore’s normal take was for such a manipulation? He receives a call for 1 year on 2000000 shares and that’s worth about 10%, so 800000. Then use of 6 million for manipulation for 1 year, enablling him to front run with that stake. How to value that aspect? Let’s say 500000.

He engaged in these transactions in the 1920-1929 period. No wonder Livermore was worth 50 million at the height of 1929 before losing it all, and declaring bankruptcy the fourth time, and going bust for at least the twelth time in 1934, before his suicide at the Sherry Netherlands.

it reminds one of the radi0 show tag line “crime does not pay”.

Dealing With Losses

  
  Education
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A few quick caveats:

  1. There is no place for denial in successful investing.
  2. Don’t blame your losses on bad luck or outside manipulators.  Accept the responsibility yourself.
  3. Don’t be dependent upon trading for all your fulfillment and happiness.
  4. Focus on opportunities, not on regrets.
  5. Proper risk control and discipline is non-negotiable for every trade everyday.
  6. Revenge trading – trying to make back a loss – carries with it far too much emotion and is always costly.
  7. Poor money management skills are the number one reason that novice traders wash out.
  8. Learn to recognize your impulsive state of mind and take action to stop it.

Even the best traders in the world book small losses on a regular basis.  If you manage your emotions with consistency and if you strive for a disciplined trading mindset, then you should have no problem surviving a string of bad trades and showing profits at the end of the year.

Traders Psychological TEST

  
  Education
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Paul Farrell observes that 95% of traders don’t make it. 80% of all day traders lose money. One study found active investors turn over their portfolios excessively (258% annually) but made less than 12% on their money. Passive buy-and-hold investors with only 2% portfolio turnover had significantly better returns.

And, most day traders suffer negative health consequences from their hyper active market moves.

To find out what your trading instincts mean — to grade your own Traders Psychological Profile — answer the following questions Yes or N:

Traders Psychological Profile
Y N You’ve tried more than one new investment strategy this year
Y N Feel you’re buying and selling funds at the wrong time
Y N Rarely open up to anybody for feedback about your losses
Y N Subscribe to two or more newsletters, feel overwhelmed
Y N Can count on one hand all the good laughs this week
Y N Have a lingering resentment about someone or something
Y N You love cable news, but need more time to trade
Y N Rarely break a sweat when exercising the past few weeks
Y N Wonder whether you bet too much on recent investments
Y N Need more than three caffeine and alcohol drinks a day
Y N Feel “something” keeps you from making more money
Y N Frequently don’t trust your instincts or your strategy
Y N You’ve had a major family or personal loss recently
Y N Believe losses are caused by the market manipulators
Y N You’re overweight and snack often on comfort food
Y N Fear your future trades may fail due to a losing streak
Y N Diet and sleep are disturbed by worries about money
Y N Your retirement portfolio’s not growing fast enough
Y N No vacation in a year, and lack an active social life
Y N Nothing (or everything) interferes with making money

 

Add up the number of Yes answers. Farrell notes that if your total number of “yes” answers is six or more, then day trading is too stressful and risky for you.

The alternative to active trading is intelligent asset allocation. At the very least, he advises that you segregate your “untouchable” retirement money . . .

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