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Reminiscences of a Stock Operator
This is Edward Lefevre's story of the legendary speculator, Jesse Livermore; almost seventy years after its original publication, the observations on the market and its players are still amazingly relevant.

Some things have changed in the stock market, certainly, since the first two decades of this century. In that era, the abundance of insider trading and the absence of reliable company data made speculation the name of the game. Directors and officers were free to trade their company's stock in advance of the public release of significant news and, accordingly, the best indicator of what was happening with a company was the price movement of its stock.

Still, many aspects of the financial markets are still very much the same as they were in Livermore's day. As he points out, human nature is a constant — an observation that is as true today as it was then. Among the many other insights in this book, here is a brief collection of a few of the best:

One of the most helpful things that anybody can learn is to give up trying to catch the last eighth-or the first. These two are the most expensive eighths in the world. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

I am so accustomed to losing money that I never think first of that phase of my mistakes. It is always the play itself, the reason why. In the first place I wish to know my own limitations and habits of thought. Another reason is that I do not wish to make the same mistake a second time. A man can excuse his mistakes only by capitalizing them to his subsequent profit.

In every boom companies are formed primarily, if not exclusively, to take advantage of the public's appetite for all kinds of stocks. Also there are belated promotions. The reason why promoters make that mistake is that being human they are unwilling to see the end of the boom. Moreover, it is good business to take chances when the possible profit is big enough. The top is never in sight when the vision is vitiated by hope. The average man sees a stock that nobody wanted at twelve dollars or fourteen dollars a share suddenly advance to thirty — which surely is the top — until it rises to fifty. That is absolutely the end of the rise. Then it goes to sixty; to seventy; to seventy-five. It then becomes a certainty that this stock, which a few weeks ago was selling for less than fifteen, can't go any higher. But it goes to eighty and to eighty-five. Whereupon the average man, who never thinks of values but of prices, and is not governed in his actions by conditions but by fears, takes the easiest way — he stops thinking that there must be a limit to the advances. That is why those outsiders who are wise enough not to buy at the top make up for it by not taking profits. The big money in booms is always made first by the public — on paper. And it remains on paper.

This book was published seven years before the 1929 Crash. Although Livermore avoided the first mistake of speculators (getting out too late), he made the second (getting back in too early). The market declines of late 1931 and 1932 drove him to bankruptcy and, eventually, to suicide.

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