Reminiscences of a Stock Operator

Slow week for me and my strategy, only traded Monday. End of today I had two pop up on the screener, but I decided against both - one was extremely low volumes and the second was on high volumes but a renewed offering. Not sure about the new offering and how that affects the future price, so I decided to pass.

I have a back porch remodel project going on so I have not had a lot of time to work on NT or TWS. I have however received LeFevre's Reminiscences of a Stock Operator (annotated edition) from Amazon which has made for some excellent end of day reading.

The story is fascinating. Written in the first person, the book chronicles the trading exploits of one Larry Livingston (primarily centered on the career of real-life Jesse Livermore) just after the turn of the 20th Century. The writing is full of period references and slang (which the annotated version helps to interpret), but the story is one that I am already personally familiar with, albeit on a much smaller scale. What strikes me is that Livingston thru the course of his trading career comes to some of the same conclusions that I have - and quite remarkably, in the same order. I am only a third of the way thru the book, but thus far some of the things that coincide:

'Of course there is always a reasons for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn't go into explanations. I didn't ask the tape why when I was fourteen, and I don't ask it today, at forty. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months.'

My notes: The mechanism behind changes in price are always the same - more people wanting to buy, or more people wanting to sell. The reasons behind price fluctuations don't necessarily need to be understood, the fluctuations themselves just need to be noticed (or fluctuation pattern).

'The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.'


'No diagnosis, no prognosis. No prognosis, no profit.'

My notes: Don't trade for the sake of trading or just to be in the market. know what you are trading, and trade what you know.

'I have heard of people who amuse themselves conducting imaginary operations in the stock market to prove with imaginary dollars how right they are. Sometimes these ghost gamblers make millions. It is very easy to be a plunger that way.'


My notes: Paper trading definitely has its merits, but no substitute for the real deal.

'A man must believe in himself and his judgment if he expects to make a living at this game. That is why I don't believe in tips. If I buy stocks on Smith's tip I must sell those same stocks on Smith's tip. I am depending on him. Suppose Smith is away on a holiday when the selling time comes around? No, sir, nobody can make big money on what someone else tells him to do. I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgement.'


My notes: Trust your own judgment and strategy rather than rely on or pay for someone else's.

Pretty cool stuff - and what a confirmation of my journey. On that note, I have run across several things that I have not made my own yet - 'own' - as in lost money and decided that I needed to change something. Maybe acknowledging the ideas is the beginning of ownership:

'There was as much to learn from partial victory as from defeat.'
'They say you never grow poor taking profits. No, you don't. But neither do you grow rich taking a four-point profit in a bull market... Where I should have made twenty thousand dollars I made two thousand. That was what my conservatism did for me'.
'I think it was a long step forward in my trading education when I realized at last that wen 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.'


'It never was my thinking that made the big money for me. It was always my sitting.'

'It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.'


Livingston writes here of missing the big moves. He considered small capture of the big run a partial victory and evidently kept track of the trade after the exit. He reckons his switch to the general market trends as a primary  lesson. I am not there yet (waiting to see if this strat works), but I want to keep this in mind.

I expect the last 2/3 of the book to be just as informative. Let's see.