This is Edward Lefevre’s story of the legendary speculator Jesse Livermore – and Reminiscences of a Stock Operator is full of trading wisdom.

Although written 83 years ago, its wisdom and insight are timeless, being often featured as one of the top ten investment books of all time – and this is a book every trader should read.

Jesse Livermore – A Trading Legend

The book follows the exploits of Jesse Livermore and his colorful trading history.

He made and lost tens of millions of dollars, speculating in the stock and commodities markets during the early 1900s.

At one stage, he made $10 million dollars in just one month – imagine what this amount would be worth today!

The Importance of Money Management

Reminiscences of a Stock Operator, though, are not so much lessons in how to make money – but how you should protect what you have.

The book is a witty and entertaining read – but the real value of the book is the insight into a traders mind, and how our emotions cause us to lose more than we should – if we don’t trade with discipline.

As Livermore says:

“Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.”

Can you associate with that? – I can!

“All stock market mistakes wound you in two tender spots – your pocketbook and your vanity.“

Yes, we all hate taking losses, but at the end of the day, you have to forget your pride – as Livermore says, but you need to keep losses small.

The Myth of Market Timing

Whilst the book is rightly seen as an insight into trader psychology, it also makes an important point in relation to market timing, and trying to PREDICT market turning points.

As Livermore correctly says:

“One of the most helpful things that anybody can learn, is to give up trying to catch the last eighth-or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.”

He’s Right!

Many traders make the mistake of trying to predict market turning points – and follow methods such as Gann and Prechter – but the fact is, the best way to make money, is to wait for confirmation – before entering the market.

You miss a bit of the move, but so what? – You will make money overall, as the odds will be in your favor.

Predicting the market, nearly 80 years after Livermore’s death, is still a major mistake traders make today.

A Sad Ending and a Lesson

This book was published seven years before the 1929 Crash.

Although Livermore avoided losses in the crash – he got out before the crash – he made the mistake of going back in too early – and lost heavily.

The market falls of late 1931 and 1932 drove him to bankruptcy – and eventually to suicide. This shows how even great traders like Livermore, could not keep their emotions out of trading – we all know it’s hard to do, but it’s an essential part of trading success.

Reminiscences of a Stock Operator remains one of those books that is a true classic, in the eyes of all who have read it.

If you have not read it, do so – it will bring a smile to your face, and give you trading insights you will remember forever.

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