Reminiscences of a Stock Operator – review

This book was mentioned by a few of the interviewees on Chat with Traders. Eventually, I decided to get a hold of it and see what the fuss is all about. I snapped up second hand copy – probably the best investment of 4 GBP since long!

Reminiscences of a Stock Operator by Edwin Lefèvre was first published in 1923, but seems to provide timeless insights into the workings of the stock market. It is written as if it was an autobiography recollecting the experiences of a stock trader who the author calls Larry Livingstone. Apparently, it is based on the famous trader Jesse Livermore.

Quite a few of the lessons Livingstone learns along his trading career are also talked about in the CWT interviews. It is quite remarkable how human behaviour in the stock market world doesn’t really change over time. The way this book tells these lessons made them very accessible to me. Even though they were basically repeated knowledge, I felt more compelled to listen. It might be the style of the book or just the right moment in my trading journey.

I also gained some basic background insights. Sure, some practices the book talks about are probably outdated now; if so, they have most likely been replaced with new tricks of similar effect.

This is definitely a book I will read again. I think it’s the kind of book that has you discover new insights with every read.

Here are some of the book’s main points

  • Livingstone emphasises that he would mainly trade with the trend – short in a bear market and long in a bull market. It was unclear to me how long he holds a stock though, but he didn’t seem to be irritated by minor swings in the opposite direction as long as the bigger movement followed his prediction.
  • He seemed to base his decisions mostly on price action, but used news or events in economy or politics to inform his decisions. He definitely built experience and confidence by observing the ticker for hours on trading days, especially in the early years. With all the fancy indicators and metrics around today, it is reassuring to know that a trained eye can make good use of clean charts. Thus, “screen time” is invaluable.
  • Livingstone would not give or take tips. For once, he didn’t want to be made responsible for other people’s losses in case things went pear-shaped. He also strongly believed that piggybacking was bad practice, and every trader should do their own due diligence. Nowadays, you see this a lot on social media – charts of hot stocks, watchlists, highlighted news items etc. Some online platforms even have inbuilt piggyback functions that allow you to trade passively alongside a successful peer.
  • He explains that news about a company’s performance is generally released too late to public. By the time it comes out, insiders have completed their transactions in silence. Then the public drives price further and increases insider profits.
delayed news quote
quote on news
  • Livingstone talks about benign and malign manipulations. He has handled some “good” ones himself to allow insiders to dispose of their holdings. As far as I am aware, certain pump and dump practices are illegal, but such things still happen. I’m not sure whether this is more of an issue in day trading.
  • Relationships are an ambiguous beast in the finance world. His attitude is basically not to take things personally if things go wrong due to advice from or events caused by another trader. Every trader is responsible for their own decisions. Friendship ends when money comes in – at least temporarily. Blind trust is misplaced in Wall St. Most of the time the own profit comes before somebody else’s.
  • However, reputation is crucially important to Livingstone. It is required to build strong relationships just as in any other business. Such relationships have helped him get loans and support.
  • Livingstone took breaks from trading every so often and pursued a lifestyle that reflected his riches. He afforded fancy things and went on holidays to clear his head. However, he would also cut his holidays short if he came across interesting news in the papers or the ticker. He was certainly not shy to take opportunities whenever they presented themselves.
  • While he surely had a passion or at least a strong drive and talent for stock trading, he made the point that emotions must not interfere with your decisions. He had lost thousands to millions through such mistakes.
book quote
quote on passion

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