Why do many people praise Livermore?
Jesse Livermore can be considered a top trader in the world of speculative trading, and he is also my idol. Although his ultimate outcome was not pleasant, it does not affect us from studying his top-tier operations. I have read his book "Reminiscences of a Stock Operator" many times and have been inspired by it on more than one occasion, benefiting greatly.
Of course, he was also a controversial figure. Some say he held too much position, acted like a gambler, lived a chaotic life, and eventually went bankrupt and committed suicide, claiming that his life is not worth learning from. But after trading for so many years myself, only I can understand his various actions and mindsets in trading, admire him, want to be like him, yet also realize I cannot become him.
Everyone has a different understanding of his past, so let me talk about some of his divine operations in trading.
In October 1929, he made $93 million during the great crash of the U.S. stock market, a process that was thrilling throughout. Livermore had been gradually trying to short sell since early 2019, when the market was still hitting new highs, betting on the burst of the stock market bubble, with significant profits and losses along the way. In October 1929, he mortgaged a large amount of his assets to borrow money to short sell, and at the age of 52, he reached the pinnacle of his life.
What was the concept of 93 million dollars at that time? The federal revenue of the United States in 1929 was only 3.7 billion, and the federal revenue of the United States in 2023 is 4.4 trillion. Translated proportionally, it is equivalent to him making a profit of 100 billion dollars in one battle today, an achievement that is unmatched even now.
We have all seen superhero movies, especially us men, who have all had the dream of wanting to become superheroes. Livermore was the superhero in trading. The huge profits he made in trading are the dream of all traders and also my dream. Everyone fantasizes about wealth, and before trading, they have all thought about what they would be like after success, how chic and how extravagant, which is also the reason why many of us admire and promote him.
However, in addition to his success, everything he has experienced also resonates with most of us traders.
The author of "Reminiscences of a Stock Operator" is Edwin Lefèvre, and the content of the book is his interview with Livermore, which has been organized and edited. He used the pseudonym Larry Livingston to review his trading experiences in the first person and summarize his trading ideas.
Most people get to know Livermore through this book. I first read this book about ten years ago, when I had just experienced a trading failure and began to re-examine my past trading experiences. I couldn't understand why I failed and was always looking for ways to succeed in trading, in a state of chaos and confusion.
When I saw what Livermore said, all the mistakes he made in trading were exactly the same as the mistakes I made in trading. Such a great god would also make the same mistakes that ordinary people would make. Suddenly, I gradually understood the market and my own trading behavior, no longer indulging in the pain of failure, and gained the courage to reconcile with myself.This is the reason why this book deeply touched me.
After finishing reading this book, I almost saw myself clearly. I listed a whole sheet of paper with my own mistakes, and combined with the methods in the book, I summarized some strategies to correct these mistakes.
For example, the human weaknesses in trading are inevitable;
One should not blindly trust others' opinions and make wrong trades;
If one's will is not firm and does not adhere to their own trading rules, they will make big mistakes;
Ignoring the timing and trading continuously will lead to heavy losses, and so on.
These contents are particularly realistic, unlike some books that talk about content that is too mystical and not down-to-earth. The "speculation god" in this book is just like you and me, an ordinary person who also makes many low-level mistakes, which gives me great comfort.
However, some people look down on him, saying that he lived a luxurious life, his private life was chaotic, and he ended up committing suicide.
In fact, from a God's perspective, none of us are perfect. We are all players in the game and cannot predict our own endings, nor can we lead a perfectly flawless life. This is similar to the early demise of Steve Jobs, who had a peculiar temper and was irresponsible to his family, but it did not prevent him from creating legendary products and becoming a generational icon.
Therefore, as traders, we can see ourselves in his experiences and benefit from them, which is enough.