Archives of “reminiscences of a stock operator” tag

rss

Trading Books -Every Trader Should Read

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

The Market Wizards Series – Jack Schwager:  Chances are you will find these books on the shelf of any serious trader.  They are without a doubt the most comprehensive collection of interviews with superstar traders ever published.  However, their dirty little secret is that although they capture perfectly a moment in time, they are extremely dated and will give you almost no insight into today’s markets or how to trade them. Their value now is in showing how even the greatest traders initially struggled and often blew up (repeatedly) before becoming successful.

Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets – Stan Weinstein: This book was the first to quantify one of the most important concepts in trading; the four stages in which stocks move, which are the basing, advancing, topping, and declining stages.  Despite the fact that the cover of this book has not been updated since it was published in 1988, stage analysis is still relevant today.

How to Make Money In Stocks – O’Neil:  As an unnamed trader friend of mine recently said, all you need to do is review the charts in the first 150 pages of this book and you will be good to go.    These charts along with O’Neil’s annotations, give you a great foundation to understand the patterns stocks form before they go on massive runs.

Reminiscences of a Stock Operator – Edwin Lefevre:  Tough call on this book, only because I don’t think it is the Rosetta Stone of trading books like it is often described as.  The language is dated and colloquial, which though strange, is actually part of its charm. There are definitely some foundational lessons for trading in this book, but you as the reader have to do the historical conversion in your head from venue’s like “bucket shops,” to today’s market. (more…)

On Trading Psychology

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

From “Reminiscences of a Stock Operator” by Edwin Lefevre, the 1923 classic pseudo-autobiography of legendary trader Jesse Livermore:

… I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game — that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily — or sufficient knowledge to make his play an intelligent play.

Sometimes the best play is to not play at all. When playing the market, you have to let the opportunities come to you, and take advantage of them when the odds are in your favor. If you don’t, you’ll get very frustrated — and you’ll lose money.

Five Timeless Rules of Investing Learned From Jesse Livermore

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

.  “My greatest discovery was that a man must study general conditions, to size them up so as to be able to anticipate probabilities.”  What did Livermore mean by “general conditions”?  He meant the macroeconomic environment and geopolitics.  Are they favorable or not favorable to buying stocks?  Today, the Fed is raising rates and squeezing the money supply (the monetary base declined last month for the first time in years; a year ago, it was going up 10%.)  The war in the Middle East is heating up.  These general conditions are not conducive to a bull market, except for gold!

2.  Learn from wise old men who have experience in the markets.  In Reminiscences of a Stock Operator , the author talks about “the Old Turkey,” a “very wise old codger” who counseled Jesse Livermore on making good investment decisions and avoiding mistakes.  How can you do this?  The best way is to read histories of the great investors such as Warren Buffett, Peter Lynch, John Templeton and J. Paul Getty.

3.  Learn your strengths and weaknesses.  “We’ve all got a weak spot.  What’s yours?” asks the Old Turkey.  A good question that we must all answer.  “Study mistakes,” he counsels.  You don’t learn from your successes, only from your mistakes!

4.  Always save some of your gains.  “I was again living pretty well, but always saving something, to increase the stake that I was to take back to Wall Street.”  Unfortunately, Livermore made the mistake of not living up to his own advice.  He leveraged himself too much, and often went bankrupt.  By taking some of your gains and investing the funds in alternative investments, such as real estate, art and collectibles, or gold coins, you protect yourself in case you are wrong.

This reminds me of something that happened to me many years ago.  I had made a $2 million profit on a penny stock and my wife sat me down and insisted I pay off the mortgage, which was sizeable.  I told her I preferred to reinvest the profits in more penny stocks, but she insisted, and I finally agreed with her and paid off the mortgage.  It was the best decision “I” ever made!  Had I invested the profits in more penny stocks, I would have lost my shirt, because the penny stocks went into a major bear market soon after.

5.  Beware the charismatic financial guru!  “It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind.”  Oh, how true.  I well remember the times I invested in several tax shelters that eventually went bust, because I was thoroughly convinced by a smooth talking salesman who seemed brilliant at the time.

Observation, Experience, Memory and Mathematics

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

“Observation, experience, memory and mathematics – these are what the successful trader must depend on. He must not only observe but remember at all times what he has observed. He cannot bet on the unreasonable or the unexpected, however strong his personal convictions may be about man’s unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities – that is, try to anticipate them. Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass.

“A man can have great mathematical ability and an unusual power of accurate observation and yet fail in speculation unless he also possesses the experience and the memory. And then, like the physician who keeps up with the advances of science, the wise trader never ceases to study general conditions, to keep track of developments everywhere that are likely to affect or influence the course of the various markets. After years of the game it becomes a habit to keep posted. He acts almost automatically. He acquires the invaluable professional attitude that enables him to beat the game – at times! (more…)

On Trading Psychology

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #

From “Reminiscences of a Stock Operator” by Edwin Lefevre, the 1923 classic pseudo-autobiography of legendary trader Jesse Livermore:

… I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I always made money when I was sure I was right before I began. What beat me was not having brains enough to stick to my own game — that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily — or sufficient knowledge to make his play an intelligent play.

Sometimes the best play is to not play at all. When playing the market, you have to let the opportunities come to you, and take advantage of them when the odds are in your favor. If you don’t, you’ll get very frustrated — and you’ll lose money.

Go to top