Customer Reviews

Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore (Annotated Edition)

5 star:		(17)
4 star:		(4)
3 star:		(2)
2 star:		(1)
1 star:		(1)

 

 

This is a great book and a must read. I hate giving it a low mark. But my reason is not for the content itself, but the Kindle edition.

I am just stunned at how the editors (or whomever) did such a poor job on the Kindle edition. It is unreadable. The annotations are mixed in with the text, not hyperlinked. Disaster. What a waste of a wonderful medium!

I went ahead and bought the non-annotated version. It's wonderful. I can actually read it. I suppose it's nice to the have the annotated version to refer to later, after I'm actually done reading the ACTUAL book.

To the folks behind the Kindle edition -- shame on you. You rushed it out and it shows.

I read Reminiscences of a Stock Operator around ten years ago. I was trying to understand trading dynamics in the market, and the book was mentioned frequently.

It is a classic. But can a classic be made better? In this case yes. Jon Markman, an able financial writer, has written notes around the narrative, with pictures and graphs that illustrate many things that would be obscure to the reader of the book. Markman brings forgotten people to life, and motivates the events that transpired.

It was an exciting era, one where the common law of contracts played a greater role, and statutory law played a lesser role. It wasn't no-holds-barred, but it was close.

We are experiencing our own era of leverage that is too high, and what happens when it breaks. The protagonist of the book, Jesse Livermore, aims for best advantage, and learns as he goes along, going broke several times in the process, and dying broke as well. Leverage cuts two ways. Live by leverage; die by leverage.

Paul Tudor Jones II writes an appendix to the volume, as well as a foreword. Being a trading billionaire who started from scratch and went broke a few times, he is an excellent man to get into the mind of Livermore on a modern basis.

Who would benefit from this book: Historians would benefit, as would those interested in trading. Economists wanting to get a look at market microstructure would also benefit. Livermore, more than most, gives a full view of technical analysis, because he lays bare the motivations of players, and how other players attempt to devine those motivations.

When I first read "Reminiscences of a Stock Operator" in 1985, I have to admit, I found myself skimming it as it did not hold my attention. Markman has enhanced that book many fold. Not only is it now rich with financial history during that era, it brings to light much of the message that was not apparent in the original. If you have ever read the original, read this one, and my bet is you will appreciate it much more. You can read the original here, or you can read a detailed history of the financial world in the late nineteenth century and early twentieth century, or you can read them both, all in this book. Nice!

For me, this was one of the most powerful books I have read to help my trading career. In fact, each time I read it again, I get a new insight into trading and watch my trading go to the next level.

It showed me the aspects of trading that I would not have even considered. The markets are made of people, and people stay the same, and the markets do the same thing over and over again.

This book was so educational. At times though, I found the stories a bit pointless, but then I realised that it was only when I went back to read them the next few times around, did I get the point of the story, since the concepts were a bit beyond me the first time around.

The first couple of chapters I found a bit boring, but after that I was hooked.

If you are serious about becoming a trader then this book really is a must ready.
I know many great traders and this is also a book they recommend.

The book is based on the story of Larry Livingston and explains how Livingston was not an investor, but rather a speculator and didn't care if he was Long or Short on the market. His goal was to make money and he made multi millions from the stock market and he explains how.

Some of the great concepts that he details are:
* The trend
* Buying tops and bottoms
* Letting your winners run and cutting the losers

These are just some of the very powerful concepts he explains in detail and allows you to really get your head around the idea and fully understand it.

If you are new to trading, then this book will teach you the powerful concepts that you want to build your trading career on, and if you're an experienced trader, then this book will likely take your trading to the next level.

If there was only one book you were going to read on Trading, please make it this one.

I downloaded the Markman annotated version of "Reminiscences of a Stock Operator" as the first book purchase for my new KindleDX. Sadly, once I opened the file on my Kindle I discovered that there were no annotations in it--only the original "Stock Operator" text. Because I paid almost 10 dollars for the annotated download and because I could get the original text for almost four or five dollars less, I was very unhappy with my purchase, and thus I am giving the book one star, but with the caveat that this is more about service than the book content itself, which promised to be very good (based on a sample I saw from the publisher's website). Anyway, and happily, a nice lady from Amazon refunded my money (and took the unannotated book back off my Kindle) with no questions asked, so that was good. But buyer beware--if you are looking for an annotated edition for your Kindle, you may not get what you are paying for here!

Aged 14, Livermore leaves his family of subsistence farmers and arrives in Boston with $5. It will be another 5 years until the first Dow Jones index, comprising of 12 stocks, is formed in 1896.

Price (1891-1901)

For 10 years Livermore day trades. As he says: "in a bucket shop where your margin is a shoestring you don't play for the long pulls". Bucket shops are places where no actual transactions take place (the house takes the opposite side of the bet). Bucket shops offer three advantages: instant execution, a guaranteed stop loss and lots of margin. In fact both times Livermore goes broke (and in debt the first time) he does so when trading from brokerage firms, not bucket shops. Livermore has trained himself to "read" small moves of up to 2-3% and his orders are "at the market". In the brokerage firms however (where $1000 will "only" get you $10,000 of stock), he gets terrible executions and this is the reason he goes broke both times before he turns 24 in 1901. The second time he also had to face violent price movements in Northern Pacific on Thursday May 9, 1901. The stock was cornered and went from $160 to $1000 and closed at $325 only after Morgan and Harriman reassured traders that they would not force delivery. (The ticker had a 10 minute delay from action on the floor). Again, Livermore will go to the few remaining bucket shops to make some money (which were becoming fewer by that time, until they were banned in 1915).

Time (1901-1908)

From here on, Livermore will try to cash in on the big bet. As he says: "A big swing will mean big money if your line is big, and to be able to swing a big line you need a big balance at your broker's." He has to change his game. His focus shifts from studying short-term price fluctuations to the study of timing longer term movements. He has to play for the long pull. To do this successfully he begins to study general conditions, including the money markets. Having mastered individual stock movements and the technical part of stock speculation he moves on to study basic principles. As he will later say, Every successful trader has to anticipate. However, in 1906 he goes broke again. To blame is his wrong timing. His outlook remains on the bear side and on borrowed money and this time he successfully shorts Great Northern in late 1906 and covers in February 1907. He then goes on a vacation to France. His trip ends abruptly when he sees the market advancing by the bull cliques "fighting desperately against conditions- against common sense and common honesty". He finds a fast boat leaving Paris for New York and shorts the market with $500,000 on margin. As he says: I certainly pushed my luck to the limit. What is the use of being right unless you get all the good possible out of it? October 24, 1907 will find him with more than $1 million. Over a period of six weeks the Panic of 1907 will net him more than $3 million. And in the spring of 1908 he will clear another $2 million in cotton.



Psychology (1908-1917)

Aged 31, Livermore has mastered the price and time aspects to trading. Soon he will also learn about the human factor in trading. As he says: "To learn that a man can make foolish plays for no reason whatsoever was a valuable lesson." Before 1908 ends he will lose all his money and go into debt. After meeting an influential personality of the time (likely the cotton broker Theodore Hazeltine Price) Livermore is talked into such a state of uncertainty about the markets that he loses his confidence in trading. As he says: 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. The final blow occurs in 1908 when he runs up against illness and also needs to find $200,000 in cash (to defend his brother-in-law). He goes broke by trying to make the market pay for that sum. As he says: the hope of making the stock market pay your bill is one of the most prolific sources of losses on Wall Street. In 1911, he will learn another lesson. This time he subordinates his judgment to another man's desires. That man is "Williamson" who was very nice about giving Livermore money to trade. Having made a profit of $112,000 out of a $25,000 loan, Livermore goes back to pay his creditor. Williamson, however, does not accept the money. Livermore does not insist and finds himself with a moral obligation that ties up his own hands. It is bad business, and a mistake he regrets more than any other. Allowing his gratitude to interfere with his play will be Livermore's undoing. He will lose a great opportunity to make millions, an opportunity he will not find for the next 5 years ("...five years is a long time for a man to be poor. Young or old, it is not to be relished"). The years running up (1911-1914) to World War I were rather dull. As he says: I could do without the yachts a great deal easier than I could without a market to come back on... It was the kind of market in which not even a skunk could make a scent! In 1915, vexed by debts since 1908, he voluntarily files for bankruptcy. His mind now free, he can trade with some prospects of success. In 1915 he goes back to Williamson to ask for an allowance. He will get his chance to trade and will also be lucky enough to find "the most clearly defined bull market we ever had." The DJIA will gain 82% in 1915.



Livermore has caught his break and will come back big in December 1916, playing the short side. His profits will be around $800,000 to $1 million. By January 1917 rumors say that he has cleared $3.5 million recently. The Boston Daily Globe, reports him having said, I made this fortune on several issues- cotton, grain, and "war brides". This Wall Street game is a psychological one.

_________________

In Lefevre's narrative, Livermore goes broke 4 times. The first two have to do with bad executions. He then realizes that he has to change his game and go for the long pull. He sees a big smash coming in 1907. Yet, he is a bit early in calling it, and goes broke a third time. The next time we see him lose all his money, in late 1908, he will remain in a slump for the next 5 years, until 1915. During this period he realizes that, this Wall Street game is a psychological one.

The remaining of the book deals with Livermore's methods as a stock "manipulator" for other people. As he says, Stocks are manipulated to the highest point possible and then sold to the public on the way down... It is perfectly astonishing how much stock a man can get rid of on a decline. And, the public's buying capacity ... was something that they could determine only by actual tests. Sounds familiar?

In the annotations we are told that Livermore will make millions in the 1929 crash but will suffer a series of setbacks following the multi-month rally of mid-1932. He will file for bankruptcy for a fourth time in 1934.

PS. For a video on the 1929 crash and Livermore, see [...]

The annotations make this book so much better. Not only does it give you great insight on the stock market and trading, but the historical value of the annotations is immense as it relates to the US Industry and Commerce during the turn of the century.

Reminiscences of a stock operator is one of my favorite trading books, along with Market Wizard series. I think it is a must read for anyone involved in trading the markets. Don't be afraid that it was written almost 90 years ago. As Jesse Livermore says, Wall Street never changes, because human nature never change. There were ponzi schemes, stock manias and crashes in the '20s, now we have bernie madoff, nasdaq boom&bust and the subprime mess wich hopefully won't lead us to a '30s style depression.

The annotations bring colour and life to stories and characters most of us haven't heard of before. Thus it is much easier to relate to the content and find parallels in today's markets. I really like the interview with Paul Tudor Jones at the end of the book. As a billionaire market wizard, he's most qualified in getting into Livermore's mind.

To sum up, if there is a top 3 must have books for traders, this one sure makes the top.

A must read for anyone interested in trading today's market. Livermore's experiences are contemporary with today's market sentiment and action. Perseverence and discipline are essentials to trading success and Livermore emphasizes these attributes in this narrative.

I just finished reading it for the third time in the year since I bought it and it speaks to me a little more each time. Not only is it an entertaining read, but the timeless wisdom it dishes out gets right to the heart of trading. I can see myself having to buy a new copy in a couple years, after reading it several more times. About every six months is a good schedule. The quote that stand out this time is something like, "General wisdom is never near as valuable as specific savvy." The book is simply riddled with gems like this.