Bill Rempel, a.k.a. NO DooDahs!

“Reminiscences of a Stock Operator” by Edwin Lefèvre was published as the fictional biography of “Larry Livingston,” but is in actuality a biography of Jesse Livermore, one of the first famous mega-traders of stocks and commodity futures. The man started trading after working as a boy in a brokerage house and trading in several of the tiny faux brokerages called “bucket shops” where small-time traders bet against the house, and eventually became one of the most influential and widely-known traders of his day. He made, lost, and re-made millions at a time when a million dollars really meant something. In other words, don’t read this book for hints on position sizing or risk control.

What you will get are some classic mistakes and the lessons learned from them; some of the best catch phrases in the business; insight into how the markets were manipulated then and probably still are now; and what I found to be an enticing, conversational story full of intelligent introspection that made me think Jesse was in the room with me, talking to me about his life. One of my favorite little vignettes was when his wife got a “hot stock tip” that ran counter to Jesse’s established position!

When I read this book, I was struck by Jesse’s “go it alone” attitude, especially since one of the things that attracted me to trading was its “individual sport” nature. He is very attuned to the dual nature of trading; competition is not only against the other man’s intellect, but also against yourself and your psychology. Twice he mentions the technique of sending a big order to market, and then watching block size and bid versus ask on the tape, in order to gauge supply and demand. Does this sound like today’s active trader using the TICK and Level II, or what? There is very little that is new under the sun.

Livermore was the great-grandpappy of the trend followers, and his ideas carry all the way from before the “Great Depression” when he used them, to the strategies followed by the Original Turtles. He went short and long, traded stocks, options, and futures, he piled into winners and he pyramided his shorts, he used capitulation and liquidity to his advantage, and he had an insight into human nature that allowed him to “operate” the markets. Unfortunately he lacked enough discipline and insight into his own nature to allow him to keep his fortunes after he made them.

Make sure you don’t have anything else on your schedule when your start reading this book, you might not want to put it down. Buy “Reminiscences of a Stock Operator” by Edwin Lefèvre at Amazon.com.