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I just read "Trade Like Jesse Livermore." Lot of takeaway from that book, and maybe the main thing is that Jesse was a much more systematic and disciplined trader than he comes off as being in "Reminiscences of a Stock Operator."
I had the impression from Reminiscences that Jesse was mostly winging it, relying on his prodigious memory and natural trading talent to score his successes. But actually he was a hard core journalist, had meticulous trading plans and had a well-worked-out system that he followed with iron discipline.
I read a book by Livermore many years ago (I forget the name of the book) and he had some of his "technical notes" in an appendix. They meant something to him but there was very little explanation as to how they were used. I remember at the time wondering what this man could do with the Cornucopia of information available today compared to the financial pages of newspapers and a ticker tape.
You'd wonder what Jesse would do with the charts we have today, but apparently charts did become widespread later in his career and he didn't use them. He had some opposition to them.
I think he was the sort of person who would religiously avoid Bloomberg and CNBC, or watch them with the sound turned off. He was very adamant about not polluting his thoughts with the misleading opinions of others, and repeatedly says that he always loses money when he listens to somebody talking his own book or takes a tip.
One important question that I need to research the answer on: pivotal points. Jesse talks about "pivotal points," but what he describes seems to be different from the "pivot points" I see people talking about here. Pivotal points were crucial to his trading technique, and I really want to learn how to identify them.
But at the same time, I think Jesse would fit right into our market system today without missing a beat.
He said there was nothing new under the sun because human nature does not change. Bait fish motivated generation after generation by fear and greed, greed and fear.
well this is true but he seemed to be a slave to to his stock ticker and read several newspapers carefully and those notes I remember were some kind of indicator calculations.
in that time there would be basically 2 charts to work with...open-high-low barcharts and point & figure charts. The Japanese charts we use today did not come until the 1990's and basic indicators were developed in the 60's to 70's.
So he was really developing his own indicators (hence the cryptic notations in that book) and his books talked in generalities IMHO.
yes...I don't think these Pivotal points were mathematics unless they are related to his notes somehow...I think they are more related to his perception of investor sentiment.
Have you seen these appendices I am referring to?? Wish I could remember where I saw them....it was about 3 years ago...it might have been in a library book I took out.
He was also dealing with fewer shares than we are today.....he could dominate the market with a million or so shares from what I read and hence manipulate it (I believe he shorted the 1929 crash and was rightly or wrongly considered to have been a cause of it....I think that was sour grapes myself.
But I agree...time has not changed peoples nature much .... I'll bet Prince Machiavelli would still be a great negotiator today
I continue to ponder the cardinal sin of holding onto my losing trade. It's becoming seared into my consciousness.
I read website after website on trading and every single one says the same thing, "don't hold onto losing trades, it's the road to ruin."
I look at the chart of 1929 and think of all the people who held onto losers all the way down -- and held on for 17 years or more until stocks came back. Except many never did.
And here I am living in Japan, and I think about the Nikkei and 1989, which I watched happen. And there are still a lot of people living right around me holding onto losing NTT positions from 1989. I think my mother in law has one. And real estate that continues to fall to this day, 20-something years later. Heck, my house is sitting on real estate that has continued to fall since we built. I like to affectionately call it my "black hole."
Holding onto a loss this long is like a wasting disease. It saps the courage and confidence and replaces it with despair and depression and negativity. Which I see all around me. Nobody in this country expects real estate prices or stock prices to ever recover to their former levels.
That's probably the worst outcome of holding onto losers, it saps your psychic energy and turns you negative and exceedingly risk averse.
Most of those losers did not have the luxury of holding onto their losing stocks. Prior to 1929, the investors thought "margin" was free money, In some cases they could leverage their account up to 90% of their equity and they leveraged their accounts to the maximum. Then the collapse came and suddenly margin calls came fast and furious...unable settle their margin calls the brokers did what they could to get their money back starting with selling the client's good stocks first...the client could only stand and stare as his accounts were whittled away in hours and nothing to stop the bleeding many committed suicide.
To me selling is the most difficult part of the overall transaction cycle. Taking emotion out of a sale is very important. One must devise a method for exiting a position when It goes against you with as little angst as possible.
