Customer Reviews

How to Trade in Stocks

5 star:		(15)
4 star:		(9)
3 star:		(3)
2 star:		(7)
1 star:		(6)

 

 

First things first. The most important thing to recognize about this book is that the majority of it (about 2/3) was not actually written by Jesse Livermore. It was written by Richard Smitten, a man who tries (and fails miserably) to create a sort of monologue of Livermore, complete with phony quotation marks, in which the great trader outlines his system. Having said that, Livermore's actual writings are very interesting. The first few chapters of the book is a word for word transcript of Livermore's original text, and contains much in the way of useful insight and helpful tips and information. The Livermore Market Key at the end of the book is also Livermore's creation, and it, too, is useful in its own way.

The rest of the book is cobbled together by Richard Smitten, a man who seems to have made it his life's work to piggyback on Livermore's success in order to make a name for himself. Smitten took letters and interview transcripts and pieced together a phony Livermore monologue. It is unconvincing and a complete waste of time. The writing is abysmal, and Livermore's concise points and techniques (from the first part of the book, the part Livermore actually wrote) are repeated over and over and befuddled to the point that you have to remember that it is not actually Livermore speaking. Smitten's attempt to adopt Livermore's style of conversation fails miserably, and the whole of his work is tedious to the power of ten. I couldn't even get through it-I had to skip to the Livermore Market Key at the back.

The book also contains some shameless self-promotion in which Smitten attempts to peddle his biography of Livermore onto the reader and also his trading system, which he shamelessly claims will help you trade like the great legend. Smitten's writing is so awful I would never even consider anything else written by him-his seeming inability to create a concise sentence without a run on and his ineptitude at using question marks when necessary waxes tiresome in a hurry. The best book about Livermore's trading style is Reminiscences of a Stock Operator, and that book will get you closer to understanding the real Jesse Livermore than this drivel ever will. Aside from Livermore's own words (the only redeeming factor here), this book is utterly useless.

Jesse Livermore must be wearing holes in his funeral clothes turning in his grave about the butchery that Smitten and Trader's Press have perpetrated on his book. Never before have I seen so many errors in punctuation, spelling, and grammar. Did a fourth grader edit the manuscript? Furthermore, it is difficult to determine which words were actually written by Livermore and which parts were added. Since the "Livermore Key" is printed in this edition exactly as it appeared in the original (1940) edition, one may surmise that Trader's Press has an entire copy of the original. Why not just reproduce the original exactly at it was printed in 1940 to maintain some coherency? This book was jam-packed with ads for Smitten's and Trader's Press other books. However, the part actually written by Livermore is pure gold.

Jessie!
First off the pictures are magnificent as far as seeing about Jessie's life. Jessie took many millions of dollars out of Wall Street but he played for the game. He was up and down so often, and so high, that there was nothing left after the thrill was gone.

The antidotes on Jesse's life are very entertaining but not much use to refining a traders technique. If he had died a few years sooner he would have been a hero. As it is people confuse this personal life with that of a great trader who just got tired.

The included "Livermore Secret Market Key," reprint contains a wealth of information from Livermore's own hand. If I did not already have it, Smitten's book might have been useful.

Cycles!
Jesse mentions market swings from 5 to 20 points that take from a week to a month. It seems like Jesse is talking about what we now call cycles when he refers to the time element. Trading into the future.

Trends!
He talks about this idea that the best trades are those that show a profit right from the start. Therefore, by definition if a trade dips into a loss and violates your definition of what a trailing trend is, Speculators lose no sleep jettising it off right away.

Never permit speculative ventures to turn into investments. Involuntary Investors ... make a bet, stay with it, and if it goes wrong, they lose it all, "they buy a stock that goes down, and they refuse to sell and take their loss."

Trends work automatically, and consistently along certain lines. If you recognize a trend and wait to get in at the precise time, drawdowns should be at a minimum. The drawdown itself should flash a danger signal.

Pyramiding!
When your security is acting right you can safely add to your line from then forward.

One of the unique ideas that I may have overlooked in Reminiscences is that entering a trade a little late is a bit of added insurance.

There is a psychological value in drawing money out of your winnings. Something I just love to do.

Pivot Point!
There is allot in here about his Pivotal Point entry. However, unless you can get it out of the "Livermore Secret Market Key," reprint contained in the book you will not find it in the "Smitten," part.

Anyone can see where pivot points were, the psychological entry point can be determined when groups of other securities confirm the change in trend.

Double bottoms!
Jessie gets into what we now call a double bottom. The first bottom is the primary pivotal point the second bottom (or top) is what he calls the "Continuation Pivotal Point."

CPR's!
Jesse did early work on what we now call CPR's. Closing Price Reversals. CPR's often occur at the Pivotal Point.

He teaches us to only trade on pivot points. But then goes on to explain the benefits of Box-break outs, trading on new highs and new lows.

Livermore's system of Sister Stocks is clearly explained and is a welcomed addition to Reminiscences. I wonder why Smitten did not show these as a spread?

Money Management!
Your position is defined as the percentage of your portfolio you will invest in any single situation.

Find your Pivotal Points and trade in the direction of the momentum. It is the big swing that makes the big money for you.

Jessie suggests averaging up, "within the pivot point range," without defining what a "pivot point range," is. It may be the center reaction in the W of a double bottom.

The final time to pyramid is a break out (of the pivot point range?) on heavy volume. It is riskier to enter a pyramiding action when the stock is far from the base.

My take on this is that Reminiscences of a Stock Operator by Edwin Lefèvre is more helpful to a trader than "how to trade in Stocks."

The bottom line on Livermore's money management still remains something I learned from Stanley Kroll. To Quote Jessie Livermore in "How to Trade in Stocks."

Shoot the Works!
"The only area I may have differed from most speculators, was when I felt I was truly right, dead right, for-damn-sure right-then I would go all the way, shoot the works."

I have compared Livermore's original How to Trade in Stocks-The Livermore Formula for Combining Time Element and Price ©1940, with Smitten's Revised Edition ©2001.

The first seven chapters of Smitten, though titled the same as Livermore's original, have been altered. He changes the prices of stocks Livermore uses as examples (p.-5), rewrites sentences and substitutes words - e.g. starts substituting the phrase "money management" for "price" (p.-20). In addition, Smitten repeatedly recombines Livermore's original sentences into new paragraphs of his own design. Smitten's chapters 8-12 are not even in the original.

Perhaps Smitten was trying to clarify Livermore's sometimes awkward prose, but it would have been better to leave the original text as is, and add margin notes, footnotes, or separate chapter summaries. Anyone with a basic familiarity of technical analysis can extract the gist of Livermore's ideas from the original text.

Smitten's 2001 edition includes the Livermore Market Key as an appendix, wherein Livermore describes his method of keeping price records to identify meaningful movements in a stock, and this did appear to be an exact copy of that shown in Livermore's 1940 original.

Though Livermore's writing jumps around and can be difficult to follow, his original How to Trade in Stocks is pleasantly pithy - more terse and instructional than Reminisces of a Stock Operator.

A PDF of Livermore's 1940 original How to Trade in Stocks is available on the Wikipedia page for Jesse Livermore.

One here should pay attention to the fact that out of 224 pages only about 88 pages were authored by Livermore, the remaining part is Richard Smitten's commentary.

Livermore wrote seven chapters:

"Challenge of Speculation", "When Does a Stock Act Right?", "Follow the Leaders", "Money in the Hand", "The Pivotal Point", "The Million Dollar Blunder", "Three Million Dollar Profit" and Appendix: "The Secret Market Key". These chapters are an interesting read, more of a general, anecdotal trading advice than anything dangerously or revealingly specific; more of a reflection than a battle song. Then again, why would a "loner, famously tight-lipped operator" would wanna make you an animal on Wall Street? At the very core of Livermore's trading strategy was the "Pivotal Point" (trend reversal). All his trading (whether it was short or long) boiled down to the recognition and timed entry or exit at the Pivotal Point . The problem is that you will have to accept only the following explanation as to what the Pivotal Point is: "A change in basic market direction- the perfect psychological time at the beginning of a new move. It is a major change in the basic trend." There is no calculation, algorithm, further delineation given, you get a nice, tidy, utterly useless definition. Clearly, you are not gonna make millions with this "secret". As for the "Secret Key": it is a written form of simply recorded prices. Livermore was not a "chartist", so he scribbled pages after pages filled with prices arranged in six columns. Here a look at the simplest chart worth 30 odd pages of scribbles. Surely it is easier to see resistance, support, trend reversal graphically, then following columns of numbers.

Richard Smitten wrote the "Commentary":

This part is a mixed bag. He is using a more useful and structured description of the Livermore method, using highlights, current stock charts and quotes. For awhile you truly appreciate his efforts. But when he ends up repeating the very same things an average of FIVE times, advertising his future book (with "Current Reviews"!) and website, you will start having the uneasy feeling about being cheated and your reading time abused. The same goes for the pictures of Livermore and his family; while they are interesting, they have nothing to do with titled purpose of the book. (Why did Mrs. Livermore shoot poor lil' Jesse? Why did Jesse shoot the dog? Oh, well, please read my next book on these...)

I'm not sure whether this book deserves 1 star or 5. I read the thing several times and learned a lot from it. The first few chapters (50 or so pages) are the original text from Livermore's book of 1940. The rest is an astonishingly poorly written, edited and organized 'summary' and 'expansion' of the original text.

The first 50 pages are a must-read. The rest is an irritating dog's breakfast from someone who does not appear to be terribly familiar with the stock market and trading.

Livermore lived during the Great Depression and was known as "The Boy Plunger" for taking on large positions. He had been trading stocks since he was 15 and was regarded as one of the best speculators of his time. He made and lost millions, and this was back when a million was a lot of money. If Livermore was alive today he would be one of the most sophisticated traders around.

I've read this book eight times and every time I read it, I pick up something new. It's so easy to read it feels as if the author is talking to you one on one. In the book he reveals his personal rules of trading, his money management procedures, his entry and exit strategies, and his rules for emotional discipline.

A lot of what he says is common sense. At least it seems that way when he explains it but it goes against what the Wall Street machine tells us. For example, Livermore stresses that you should "never average down. Why add to a trade you are already losing money on?" He also describes the foibles of buy and hold. Many people of his time bought the blue chips of the day - the railroads, steamship companies, buggy whip companies, and others who are no longer around. "Life is change" he reasons, "your clothes change, your kids change, you change lovers. So why cannot the reason you buy a stock change?"

Some of his rules include:

Always trade with the trend, along the line of least resistance.
Make sure all the factors are in your favor before you make a trade. (The factors are detailed in the book)
Stay with the leading stocks of the day
Group action is a key to timing - Stocks do not move alone.
Don't buy your entire position at once.
Always have a stop before you get in a trade. (Livermore used 10%)
Never takes tips from anyone
Never argue with the tape.
You should not be in the market all the time.

One of the things that helped me was that after a large successful trade, the author recommends taking half the profit out of the market. Put it away somewhere safe.

Even though the author says he never used charts, it seems that he was a technical, trend follower by today's definitions. He got in on what he called Pivotal and Continuation Points which he describes in Chapter 5.

Even though most of the book is put together by Smitten, it is still an enjoyable read for someone looking to put together a trading strategy and system. Someone who is new to the stock market will find a plethora of beneficial information. And the infomercial other reviewers have mentioned is only a short 6 pages at the back of the book. I've also read Reminiscences of a Stock Operator (Wiley Investment Classics) which is the story of a trader based on Livermore's life and Smitten's Jesse Livermore: World's Greatest Stock Trader and learned a lot from each of those as well. Both highly recommended.

I hope this review helps you in your decision to buy this book or not. I find that it is a mandatory read for all investors and traders. It has definitely helped me to improve my stock trading. If you want to read more of my reviews of stock trading and investment books, you can get them at TheTradingTipster.com

The editing is pathetic as if it was slapped together and thrown out there in rough draft. The book repeats itself over and over as if to fill up pages, p.65 caption refers to charts of INTL and semi ind. with charts of LU and telecom ind. above it, and publisher ads, too. I got almost as much out of "Reminiscences of a stock operator" (about Livermore) as I did this. There are some good points from Livermore, I think, hard to tell his words from Smitten additions. Hate that. Livermore market key is worth it, but I'm steering clear of this publisher in the future.

If you want to sit in on a seminar with one of history's greatest speculators, this book and reminiscences of a stock operator are as close as you will get. There are many golden nuggets of trading philosophy and method in this book. If you can grasp what livermore says in this book, and as he says actualy have the patience and discipline to follow it you will be well on your way to success in the financial markets. It is important to realize that this book was written 17 years after the other great book on livermore ( reminiscences of a stock operator was wriiten in 1923) This book was written in 1940, the last year of Jesse livermores life after spending 40 plus years as a professional speculator. If the wisdom of a 4 decade plus career of making and losing multiple fortunes in the stock market (which in my opinion is what this book captures)does not help you, you are most likely not cut out for success in speculation. Understaning and applying the lessons of this book will cut the learning curve of becoming a succesful speculator. As for any skeptic who is critical of this book as being old and outdated, this is simply not true. If you will read this book you will understand that the workings of the financial markets never realy change because human nature never changes, and the financial markets are a representation of human beings opinions in action. This book is not the only book you need, but in my opinion it should be in your trading library. Keep in mind that all reviews are only opinions, and as jesse livermore says in this book, "Opinions are often wrong, markets never are" so find out for yourself whether this book can help you and do not mistake an opinion for a fact.

This book contains the actual book published by the legendary trader Jesse Livermore. Whom many consider the greatest stock trader ever. He made $3 million in one day in 1907 and over $100 million during the 1929 crash when everyone else was wiped out. I have learned a tremendous amount about stock trading from studying this man. I have made about $10,000 in my accounts through following his principles. At the end of this book it contains the Livermore Market Key and show the actual charts Livermore used to trade stocks by putting prices in different columns and designating each days movement as a down trend or uptrend, it is different than anything else I have ever seen. I highly recommend buying this book, here are some of the key principles you will learn:

Do not buy your whole position at one time. If you want to buy 1000 shares buy 200-200-200 then 400. Only buy if the stock price goes up.

Do not try to predict the market. let the market tell you what to do by its volume and trend.

Follow the path of least resistance. Don't fight the tape.

Buy into strength, not weakness. Bargains are bargains for a reason.

Buy the leaders in the best performing industry.

There is nothing new in Wall Street what has happened before will happen again. It is up to you to learn the pattern.