Trading Books: Reminiscences of a Stock Operator
By Edwin Lefèvre
I am a strong believer that knowledge is power. I self educate myself by attending courses, reading, watching and listening to podcasts in order to become proficient in trading. ‘Reminiscences of a Stock Operator’ is definitely a book that I recommend you to read, it is about trading throughout history. The fundamentals haven’t changed, trading is very much the same today in 2021 as it was in 1928.
Edwin Lefèvre trained as a mining engineer then at the age of nineteen became a journalist. During his 53 year writing career he wrote eight books, as well as ‘The Making of a Stockbroker. His fictional account of the life of Jesse Livermore was actually first seen in The Saturday Evening Post in 1922. Then the following year 1923 it was officially first published, making the author become famous. ‘Reminiscences of a Stock Operator’ is written from the author’s perspective about the character Jesse Livermore and his life as a stock trader. The book narrates Jesse’s life from starting out as a day trader in ‘bucket shops’ to market maker (MM) * then onto achieving a fortune in Wall Street (where he gained and lost it a few times).
In 1929 which was the peak of Jesse’s career he was worth $100 million, today that is about $1.5 billion.
I would say it is a classic and the most highly endorsed investment book that has been published to date — it will also enhance your life. Regardless of your trading experience readers declare they have gained more knowledge of the stock market and its history then years of experience. Jack Schwager’s book ‘Market Wizards’ he interviews many traders that are new to trading and experienced traders for them to advise ‘Reminiscences of a Stock Operator’ has played an important part in their learning resources they have been privileged to read and today still remains in print.
The story is split into three sections:
- 1890–1910 Jesse made his money by having the upper hand on the buy/sell price quoted on inactive stocks with a leverage * of 100–1 at ‘bucket shops’*.
- 1910–1920 Jesse became a stock trader on The New York Stock Exchange, where he went bankrupt a few times due to applying too much leverage*.
- 1920’s Jesse became involved in ‘market manipulation’ * by charging fees of 25% of the market value of the manipulated stock. This occurred before The U.S. Securities and Exchange Commission was formed in 1934.
Extract from chapter one…
‘Reminiscences of a Stock Operator’ By Edwin Lefèvre
I was fifteen when I had my first thousand and laid the cash in front of my mother — all made in the bucket shops in a few months, besides what I had taken home. My mother carried on something awful. She wanted me to put it away in the saving bank out of reach of temptation. She said it was more money then she had ever heard any boy of fifteen had made, starting with nothing. She didn’t quite believe it was real money. She used to worry and fret about it. But I didn’t think of anything except that I could keep on proving my figuring was right. That’s all the fun there is — being right by using your head. If I was right when I tested my convictions with ten shares I would be ten times more right if I traded in a hundred shares..
* A bucket shop is a brokerage firm that participates in unethical business practices. Recently, the term is associated with companies that practice bucketing, which involves making a profit from a client’s trades without their knowledge.
* A market maker (MM) is a company or individual who actively quotes two-sided markets in a security, providing bids and offers (which are known as asks) along with the market size of each. They provide liquidity and depth to markets and profit from the difference in the bid-ask spread.
* Leverage is an investment strategy by the way of using borrowed money, in particular the use of a variety of financial instruments or borrowed capital. This then enables the increase of a potential return on an investment. If a company or individual are referred to as ‘highly leveraged’ this means the item in question has more debt than equity.
*‘Market manipulation’ is also identified as price manipulation or stock manipulation. Meaning impacting on purpose the behaviour of the securities.
