Good Articles to Share
3 Big Investing Lessons from the World’s Greatest Stock Speculator - safalniveshak
I have been reading Edwin Lefèvre Reminiscences of a Stock Operator over the past few days.
It’s a brilliant first-person account of the career of “Lawrence Livingston”, who is a slightly fictionalized version of Jesse Livermore, one of the greatest stock speculators of all times.
Livingston, just out of school, goes to work as a quotation-board boy in a stock-brokerage office. This was sometime in the 1890s, one hundred years before the advent of real-time internet stock quotes. Stock quotes were written on chalkboards.
He develops a feel for the stock market and, in time, begins to speculate. He’s not an investor — he’s a speculator. He gambles in stocks. And he does a great job at it, building a million-dollar fortune during his twenties.
Then he loses everything. In fact, Livingston builds — and loses — several million-dollar fortunes between the first twenty years of 1900s.
Reminiscences of a Stock Operator is an entertaining and educational book on Livingston’s career (read Livermore’s). It contains great many lessons that are also valid for investors.
Here are three such lessons straight out of the book that I believe would serve you well. The emphasis is mine.
Lesson #1: It’s More about Sitting than Buying
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!
It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn.
…a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money.
The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.
Lesson #2: It’s Foolish to Seek Stock Tips
Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after good tips, but after any tip. If it makes good, fine! If it doesn’t, better luck with the next.
It has always seemed to me the height of damfoolishness to trade on tips.
Tips are just that. Tips. Following blindly is setting you up for epic ruin. First of all you have no idea what position that tipper is in. He may not even hold the stock he is recommending. Even if he is, you have no idea when he will unload his lot. Suppose he is selling his stock to you. Then you would be forced to dump it to someone else for a higher price.
Lesson #3: It Pays to Study Human Behaviour
There is profit in studying the human factors — the ease with which human beings believe what it pleases them to believe; and how they allow themselves — indeed, urge themselves — to be influenced by their cupidity or by the dollar-cost of the average man’s carelessness. Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was.
…nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.
Overall, Reminiscences of a Stock Operator is a great book if you wish to succeed in speculation in the stock market (before ruining yourself, like Livermore did…several times).
It’s also a great book if, as an investor, you wish to know what NOT to do in the stock market.
http://www.safalniveshak.com/3-investing-lessons-from-worlds-best-speculator/
More articles on Good Articles to Share
China, Philippines accuse each other of ramming ships in South China Sea
Created by Tan KW | Aug 31, 2024
Chinese Navy survey ship in territorial waters, says Japan's Defence Ministry
Created by Tan KW | Aug 31, 2024
China, Philippines accuse each other of ramming ships in South China Sea
Created by Tan KW | Aug 31, 2024
Discussions
3 people like this. Showing 10 of 10 comments
Lesson 3 is especially true! Although all the facts are before him, people will still choose to believe all the lies and bullshits, simply because they choose to believe what they want to believe rather than facts. And there are so many in this I3 forum.
2014-12-05 17:21
Yes Jesse Livermore is a pure gambler at his core.
He doesn't even know the business behind the share neither is he concerned.
Price movement is all that matters
After the onset of the Great Depression the rules of trading has been changed. He couldn't adapt and lost his entire furtune then commited suicide
2014-12-06 01:37
Calvin, can you please elaborate more. Your advices provide knowledges for anyone looking to succeed.
2014-12-06 22:22
Quietspot
I first read this interesting book on Jesse Livermore titled Reminiscences of a Stock Operator in year 2006.
I think this is by far the best book on stock speculation. He knows how to read conditions and see ahead of events that will affect shares and commodities performance. He was very accurate as to the Great Depression and he short the Dow when it crashed in October 29th 1929. When others went bankrupt he made millions.
However, he lived in a time before Ben Graham came out with THE INTELLIGENT INVESTOR. This book might have saved his life if he took heed to its writings.
Since Livermore lived and breathed by speculation winning millions has no meaning for him. The gambling addiction is as strong as drug addiction and can hardly be controlled. When Jesus died on the cross the Roman soldiers gambled right before Jesus.
So when Wall Street changed the rules of speculation after during the Great Depression. With little cash outlay people can use margin to play the stock market. Jesse Livermore was unable to adapt to the changed rules and then eventually he lost his fortune. He later committed suicide in a seedy hotel.
There is a Vast Difference Between Investment & Speculation; although in Investment there is a calculated risk like speculation. Yet there is a distinctive difference between investing and gambling.
In Investing there is set rules in favour of the investor. In gambling there is also set rules - rules against the gambler. How come?
When a person gambles he placed a bet on 36 numbers. A dollar bet on 36 numbers at random by chance or luck.
If he strikes the pay out is 30 dollars - 1 is to 30. The rules are against the gambler as can be calculated like this
If he bets all 36 numbers he is guaranteed to strike. So he bets 36 dollars and he can only win 30 dollars.
30 divided by 36 = 83.3%. So he has lost 16.7% on the first round in the law of probability. And every round he gambles he is subjected to a disadvantage position of losing another 16.7% until he finally loses all.
Of course he might be in luck once a while and might strike jackpot. But over a long long period in gambling the law of probability will eventually bankrupt him.
By this same law 80% who gambles in the stock market is bound to lose money. There is a perpetual draining brokers' fees by incessant buying and selling. Only Casino & Stock Brokering Firms make money.
In Investment the set rules favouring the investor. How?
Go and read & digest these books
1) THE INTELLIGENT INVESTOR - By Benjamin Graham
2) ONE UP ON WALL STREET - Peter Lynch
3) BEATING THE STREET - Peter Lynch
4) All Books on Warren Buffet
Regards,
Calvin Singapore
2014-12-06 22:59
Many 'eclectic' investors adopt many of Livermore's methods in stock picking/selling - as much of his market principles are still relevant even today. Nowadays, almost all billionaire mart players, are investors, and most of 'em practices the value investing.
2014-12-07 10:58
Posted by Kevin Wong > Dec 7, 2014 10:58 AM | Report Abuse
Many 'eclectic' investors adopt many of Livermore's methods in stock picking/selling - as much of his market principles are still relevant even today. Nowadays, almost all billionaire mart players, are investors, and most of 'em practices the value investing.
Well said Kevin
2014-12-07 11:04
Livermore's many downfalls are mainly due to his multiple personal problems and departing from his own set of speculating principles. But i believe even if Buffett were to be beset the same kind of personal challenges and 'misadventures' as JL's had, Buffett wouldn't go bust, not even once! That's why i choose investing.
2014-12-07 15:29
Post a Comment
Featured Posts
Latest Videos
.png)
Apps
Top Articles
1
2
Stock Pick Contest Year 2024
4
Koon Yew Yin's Blog
5
6
BFM Podcast
7
8
https://dividendguy67.blogspot.com
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
MQ Trading Signals
Stock
Time
Signal
Duration
Stock
Time
Signal
Duration
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Jonathan Keung
yes . it make sense to digest what he says in his thoughts
2014-12-05 15:27