Jesse Livermore - Reminiscences of a Stock Operator

[..]

Jl

This is it. On one hand i think Livermore was a trading genius, but here's my snag, i would never refer to him in conversation to a non-trader....for obvious reasons.



That's why i said that i find it hard to get my head around the guy.

Reading 'Reminiscences" I had the impression that JL viewed money as not something in itself as worth being that concerned about, on several occasions in the book, 'he' refers to his interest being on being right and not necessarily making money - the being right was more important to him - money being a happy by-product.

Also, you will read into the text that several times he talks about not having his head straight and not being able to trade right when disturbed by his debts and creditors.

Overall, he seems to be quite a moral kind of chap.

Of course, he suffered from depression during his life, but my opinion is that this character trait assisted him in succeeding in the markets perhaps by not getting carried away with the euphoria. market sentiment?

Anyhow, I have used his scaling in techniques successfully and also trading off of round numbers, I shorted Gold when it failed at $1,000 last year and bought in at $913, so his methods are workable today no question.

Trading the line of least resistance is the key

 

[Paul71]

Can you explain a bit more about this please ?


Paul

Some traders may make a regular 10% per month, some 10% every two months...whatever. Some traders will find trading less taxing than other traders etc. So one traders success may be frowned upon by another, it's not quantifiable, you see?


This is why there is so much disagreement on trading chat forums, especially trading chat forums.

 

[Trader333]

I see, so trading success is relative and not absolute to those participants of boards such as these which agree with


Paul

 

[FXSCALPER2]

A mate said earlier today, 'Livermore is a good example of a lucky monkey'. That is quote of the year. It is probably true, what is more.

 

[trader_dante]

A mate said earlier today, 'Livermore is a good example of a lucky monkey'. That is quote of the year. It is probably true, what is more.

B*ll*cks.

 

[counter_violent]

A mate said earlier today, 'Livermore is a good example of a lucky monkey'. That is quote of the year. It is probably true, what is more.

ROFL

yep, such a lucky monkey...every bucket shop in the land barred him....hmm if he was so lucky....then by the same logic he must have been unlucky when he lost !!!

Technicals lead Fundamentals...

 

[Paddington_Bear]

A mate said earlier today, 'Livermore is a good example of a lucky monkey'. That is quote of the year. It is probably true, what is more.

I believe this is a prime example of the fallacy that I have mentioned before: luck is very different from learning and adaptation. The lucky monkey in your example would eventually get eaten – he would not learn from his mistakes.

Livermore learned and adapted, hence his success. I believe that luck has a very small part – if any part at all – to play.

 

[FXSCALPER2]

B*ll*cks.

How would you know?

 

[FXSCALPER2]

I believe this is a prime example of the fallacy that I have mentioned before: luck is very different from learning and adaptation. The lucky monkey in your example would eventually get eaten – he would not learn from his mistakes.

Livermore learned and adapted, hence his success. I believe that luck has a very small part – if any part at all – to play.

Whether an achievement is due to luck is not knowable a priori.

 

[Paddington_Bear]

Whether an achievement is due to luck is not knowable a priori.

I never suggested that it was. However, I would suggest that the a posteriori knowledge that we have would indicate that Livermore used more than dumb luck.

 

[FXSCALPER2]

I never suggested that it was. However, I would suggest that the a posteriori knowledge that we have would indicate that Livermore used more than dumb luck.

But the qualities we ascribe to people after the fact are not available to us to use as a universal explanation for the type of success people achieve under a given situation. There are people, in other words, who act and behave the same way but only very few end up with the goods.

 

[Paddington_Bear]

But the qualities we ascribe to people after the fact are not available to us to use as a universal explanation for the type of success people achieve under a given situation. There are people, in other words, who act and behave the same way but only very few end up with the goods.

I'm not going to try and deny that there is a situational bias, because there obviously is. However, I think that it is possible to argue from an empirical perspective, that the knowledge -- if you believe a posteriori can ever give knowledge -- that we have of successful traders, would point to more than luck. If Livermore had not embodied any of the character traits of the majority of successful traders, I would have been inclined to agree with you; but, I believe he did. He was not a random event in a sea of improbability; instead, he modified his methods to that of other successful traders.

It's possible to be skeptical about anything; however, sometimes we have to move beyond skepticism in order to find any that we can consider meaningful -- a concept that I have stated before.

 

[trader_dante]

How would you know?

Because I think that whilst luck can perhaps effect the outcome of individual or even multiple trades I do not think that a career can be based on luck. That's just my opinion.

Livermore made and lost a fortune many times in his career. You do not make millions, lose them, make them, go millions into debt, then go billions into profit as the result of luck.

His success and failures were the results of extreme skill offset by poor risk management and other emotional issues.

Is the idiot that believes Livermores career was down to luck, willing then to perhaps assume that he was a skilled trader whose failure was down to LACK of LUCK?

I believe a person makes his own luck.

 

[FXSCALPER2]

Because I think that whilst luck can perhaps effect the outcome of individual or even multiple trades I do not think that a career can be based on luck. That's just my opinion.

Livermore made and lost a fortune many times in his career. You do not make millions, lose them, make them, go millions into debt, then go billions into profit as the result of luck.

His success and failures were the results of extreme skill offset by poor risk management and other emotional issues.

Is the idiot that believes Livermores career was down to luck, willing then to perhaps assume that he was a skilled trader whose failure was down to LACK of LUCK?

I believe a person makes his own luck.

You are a walking cliche, TD. Of course you can make, lose, borrow, make loads, lose, etc by luck. I mean what could be more obvious. I have no idea whether Livermore was a lucky monkey or not and neither do you. I reckon it is not very idiotic to assume you are as unskilled as every other monkey who happens to be holding the goods, but not as lucky.

Another person who may be a lucky monkey is Warrent buffet. Consider how many people tried what he did to get all that dough. Can you be sure he is not a lucky monkey? You think you can because you don't understand the impact of pure dumb luck on 'success'. If you get thousands of people, you will get some spectacularly successful monkeys who will write books and you would think they are geniuses. While they may be, you really are not entitled to claim with such certainty that they are.

 

[wasp]

Success, imo, is after a few years getting to grips with it all, consistently and progressively building their wealth with minimal drawdowns and a strong 'equity curve'. That shows control and strong success. Sure, one can fluctuate from 10k > 2k > 80k> 60k > 400k > 100k > 300k > 800k, but if I were an investor in said person, I would want to see 10k > 15k > 13k > 18K > 25k > 40k > 35k > 70k etc.....

Making a lot of money is great, but its how you progress and manage and control which makes you a good trader.... Money and risk management are vital and also show a solid consistent growth through knowledge and understanding and skill...

 

[mkhall]

Livemore did make his own luck the same way he made his fortune. The man researched and understood the balance in the market and the way human’s act he made it simple for himself.

Every successful person has had bad luck at times but surely back luck is due to the individual not being on the ball or getting carried away.

So people do make there own luck on decision’s they make.

Lucky you had that stop1

 

[MrGecko]

FX makes a pretty good point you know... Buffet might well be the "lucky" one out of the millions upon millions of people who have tried to make a wedge... the more people that try, the more likely it is that someone is going to land it big time...

... anyhow - for Xmas I recieved a book by a guy called Malcolm Gladwell called "Outliers"... in it he goes on to decribe how people who are uncommonly successful - i.e. the Outliers - are so, all in terms of socio-economic, culture, age, and so on... point being "luck" has nothing to do with it...

Two simple examples: Ice Hockey Players. A distribution was made of the birthdays of canadian Ice Hockey players playing at a national level.... 40% between January and March, 30% between April and June, 20% between July and September, and 10% between October and December... why? Because of the age catergories kids are split up into at school... when you are 5 or 6 and start playing hockey with other kids, being 9 months older gives you a significant advantage in contact sports - so you get picked to play in the team more - so you get more practice - so you get better - and so on....

Secondly, Bill Gates: frankly, if I told you, you wouldn't believe it. The string of coincidences is remarkable - parents lived in seattle, were rich enough to send him to the ONLY school in the usa with a computer, etc...

Recommend you check the author out gladwell dot com - malcolm gladwell, blink, tipping point and new yorker articles

(he also goes on to say that it takes 10,000 hours to become an expert at something - anything).


The point I am trying to make is about conditional probability and semantics, which is what I think this Livermore thing is all about.

Given the number of people who have ever tried to trade for living, Livermore's trading record is nothing to get excited about - the scale of probabilities are beyond any one humans experience (what I mean is, you might think its something special, but thats only because you can't understand the sheer scale of the numbers).

Is it unlikely that, out of all the traders that ever existed, Livermore is the one? Well, depends. If you are talking about a "pin the tale on the donkey" scenario, then yes it is unlikely that the trader you "pin the tale on" is actually going to be the one who makes a packet. However - given that he happened to have the $60 dollars (or whatever), and given that he got a junior job at a broker, and given that he happened to be born in america, during the biggest economic boom in decades, and so on... is it at all suprising that he had some element of success? No.

Jesse Livermore could have never existed, we would be having the same conversation about someone else.

 

[trader_dante]

LOL Gecko and FX,

You remind me of one of those sour people that say luck is the result of everything because when you fail to make money you can blame it on bad luck. I'm not saying you are btw, just what it reads like. Infact FX in particular sounds now like the person he seems to hate - Spanish89 - who is often seen to blame his misfortune on bad luck.

So is Spanish really a great trader with bad luck?

I do realise that strings of coincidences can lead to outlier outcomes, as you show Gecko.

I am also sure that if you get enough people together, luck may intially decide the outcome - perhaps some will get ahead of others using "poor" tactics such as using no stops and they get "lucky" and the market comes back or they happen to be "lucky" enough to fat finger a 500 lot long indices when they meant to go short and then suddenly there is an interest rate cut...sure...but I am talking about long term consistency.

When do you stop believing in luck?

Your argument about coincidences above, can easily be turned on its head! Why did I smash my car up and nearly kill myself??? Is it because it was a given after I managed to blag higher purchase and buy the thing in the first place and a given that I got a job that requires me to spend more time driving than most people and a given that I left the house a little later than usual so it was raining when I was on my way....or is it simply that I drove like a reckless t*sser!

No one said Livermore was "the one". But he made enough money in inflation adjusted terms to put him up there among the biggest earners in the market of all time and he did it from nothing.

P.S Being born during the biggest economic boom in decades meant nothing. He called the market turns.

You sound like the traders across from me that say they can't make money in the Bund because it's "dried up". LOL

There have been plenty of "booms and busts" with free and easy money for anyone savvy enough to take it in the last few years: Stocks Indices (multi-year bull market and then huge crash) Crude (straight line up, straight line down), ditto the Euro, Cable...

So, show us your Billion?

Or were you simply unlucky?

Just my opinion.

 

[FXSCALPER2]

You don't understand what I am saying, buddy. You are clearly too slow. I am not saying all success is luck. I am saying, in most cases, we have no way of knowing. I may be a **** trader. So what? You have too much reverence for trading.

I think Taleb is a tiresome d!ck but what he says here is spot on:

FORA.tv - | Nassim Nicholas Taleb

 

[trader_dante]

You don't understand what I am saying, buddy.

Apologies then.

You are clearly too slow.

Indeed. It's why I don't make a good scalper and instead take big money out of the swings.

Like my idol