Edwin LeFevre – Reminiscences of a Stock Operator – Review

This book is one of the classics first published in 1923. It is recommended by so many traders over the Internet and podcasts. A trader from California told me to read this at least ten times cause I’ll get new insights each time. I have read it just once for now but I might get a hold of it again in some time.

It’s a fictional story that by all beliefs describes the life of the world’s most successful speculator Jesse Livermore who is famous for his great wins during the Great Depression of 1930s.

The book should maybe be read before all the technical analysis and market structure textbooks, since it is a story-telling composition that well describes the life of a stock punter. The ups and downs involved, greed and fear, random market moves and market manipulation all give a feeling you should prepare for if you want to be in it for the long term.

Because it is about historical era, it also gives a good description of the markets that time, bucket shops that in US are illegal today, how tape reading worked and how telegraphs were used to send messages.

What hasn’t changed is the emotions in markets. Greed and fear catch traders today just like 100 years ago.

One of my key takeaways from this book was how sitting on hands can often be better than active trading. You need to let the market play out your trade; also less emotions are involved if you don’t try to actively time the market.

One of the great quotes from the book: “Having a loss is the least of my troubles, I forget about it overnight. Being wrong not taking the loss is what does damage to my pocketbook and to the soul.” This goes by the basic saying of “cut your losses short and let profits run”.

Some other takeaways from the book: “A stock operator has to fight a lot of expensive enemies within himself.” – The outcome of our trading is mostly affected by our psychology and thinking.

“Nobody can make big money on what someone else tells him to do.” – Never trade purely on tips. If you get a tip, run it thru your own trading system first and make the trade your own.

Lots of good insights in the book, I highly recommend it.

Who was Edwin Lefèvre?

Edwin Lefèvre (1871–1943) was an American journalist and financial writer. He was born in Colón, then part of Colombia and now Panama, worked as a stockbroker, and wrote about Wall Street for the New York Sun and The Saturday Evening Post. Reminiscences started as a series of twelve articles in the Post in 1922 and 1923 before it came out as a book.

Is Reminiscences of a Stock Operator about Jesse Livermore?

Yes, in all but name. The narrator is called Larry Livingston, and the book is a roman à clef: real people and events under changed names. It is generally accepted as the story of Jesse Livermore (1877–1940) up to the early 1920s. So it covers the Panic of 1907, when his short positions made him about $1 million in a single day, but it ends years before the 1929 crash, when he netted around $100 million. If you want the real names behind the characters, Wiley published an annotated edition in 2009 with a foreword by Paul Tudor Jones.