Manhattan Reborn 1978

New Jersey.

The town of Morrison.

night.

David's bedroom light was still on.

In the room, David was reading "Memoirs of a Stock Operator" with gusto.

The story of Jesse Livermore in the book deeply attracted David.

If you look at the title page of this book, you will see this passage.

ask.

Who is the most influential investment and trading master in modern times?

If you survey Wall Street traders, most of them will tell you one name: Jesse Livermore.

"Memoirs of a Stock Operator" is a semi-autobiographical book.

Jesse Livermore tells his life's experiences and his understanding of trading in this book.

The deepest level of trading is human nature.

If you want to defeat the market and obtain excess returns, you must defeat yourself and your own irrational thinking and judgment.

The first half of the book, divided into several chapters, introduces Livermore's life and experiences.

Jesse Livermore was born in Shrewsbury, Massachusetts in 1877 into a poor family.

When he was very young, his family moved to Acton, Massachusetts.

Livermore began learning to read and write when he was 3 and a half years old.

When he was 14 years old, Livermore's father asked him to drop out of school and help work on the farm, but with the encouragement of his mother, he left home and went out to work.

Since then, the 14-year-old Livermore left home with a 5-meter knife given to him by his mother in his pocket, and began his ups and downs and legendary life.

In that era of 1891, there were many places in the United States called bucket shops (a kind of leveraged stock price betting institution, but it did not actually buy or sell stocks, similar to stock price futures).

It will also be called a stock casino.

This kind of casino is where people come here and bet on the rise and fall of each stock. The casino will compensate your investment based on the odds of the rise or fall of the stock you bet on.

To put it bluntly, it's the same as buying stocks, but you don't really have to spend a lot of money to buy stocks.

Um. .

Just spend a little money and make a bet in this casino!You can make a small profit if you win, and you can get some small money if you lose.

If you look at this business from today's perspective, it is a financial derivative.

When the 15-year-old Livermore found a job and passed by this place after working, he became very interested in this stock casino.

After that, he often used his spare time to come to the stock casino to watch the prices of various stocks constantly refreshed, and then record them in a small notebook to analyze and find patterns.

Slowly he discovered that the prices of these stocks generally fluctuated up and down regularly within a range.

As long as he buys at the low point and sells at the high point within this fluctuation range, wouldn't he win the bet and make money?

This discovery made Little Livermore very excited. With his innate sensitivity to numbers, he found this way to make a fortune. .

He decided to use the trading method he had developed and boldly tried to take a gamble first.

Livermore chose to spend $5 on a bet on the stock price of the Chicago, Bullington & Quincy Railroad Company.

The next day, he made 3 million dollars because of this investment!

that's it.

After a while, Livermore won more money in the bucket shop than he could earn at work.

At the age of 16, Livermore quit his job and became a full-time investor in Boston.

The 17-year-old Livermore returned home with 1000 meters of knife and gave it to her mother. However, her mother was very unhappy, thinking that Livermore had won the money through gambling.

Livermore retorted at the time: "This is not gambling, this is investment, speculation."

Since then, his name has slowly spread in Boston's stock casino circles.

Because he kept winning money, he was blacklisted by the local gambling house and banned him from entering.

Because Livermore was betting with the bookmakers, the casino would lose whatever he earned. Which casino would like a guy like him who keeps winning money?

Livermore tried to disguise himself and sneak in to trade, but was still discovered and expelled.

Here in Boston, he continued to hang out for another two years, feeling that he could no longer stay.

The 23-year-old Livermore, with the [-] yuan he earned, confidently came to New York to work on Wall Street.

The $1900 in [-] was more than what his parents had saved over a lifetime of work.

After coming to Wall Street in New York, Livermore still used his previous trading strategies to invest.

Since then, Livermore has started a life of ups and downs.

Why didn’t Livermore’s original strategy of buying low and selling high in the range not work in the New York stock trading market?

Within just one year on Wall Street, he lost all the [-] yuan in his pocket.

After his first bankruptcy, Livermore had no choice but to borrow 2000 meters from a friend, and then moved to St. Louis, Missouri, where he continued to trade in the stock betting shop.

In order to conceal his identity and fear that the betting shops would not accept his bets, Livermore also hired some people to help him place orders.

A few months later, he used the 2000 meters of knives in his hand to earn back 5000 knives, repaid the loan, and still had 300 knives left.

He made money, but his information as the person behind the scenes was also investigated by the gambling house.

Livermore was once again blacklisted from bucket shops and banned from betting at bucket shops throughout Missouri.

At this time, he had realized that the gambling shop was never his battlefield, and stock trading was where he showed his strength.

In this way, he patiently spent several months studying the details of stock trading.

This research also led to the gradual formation of his first self-created trading ideology.

After a period of research, he found that when a stock is in a trading range, it always has several key points that he can notice and mark them.

These points were called pressure levels, resistance levels, support levels, etc. in later stock technical analysis.

In subsequent observation and research, Livermore discovered that if a stock breaks through a few points in a fluctuation range, it will start to rise or fall continuously.

After thinking about this.

Livermore finally understood why his winning strategy in the bucket shop eventually led to his bankruptcy in the Wall Street stock market. He didn't know why.

First of all, his strategy of buying low and selling high existed in the days when the New York Stock Exchange was still a time when brokers were shouting quotes, and there was a serious quote lag.

That is, he received and saw the price, felt that he could buy it, and gave the broker a quote to buy. As a result, within these few minutes or ten minutes, the price changed and fluctuated again.

In addition, his transaction frequency is too frequent, which leads to an increase in transaction costs and a compression of profit margins.

Livermore went bankrupt within a year of severe information lag, high frequency, low profits, and large losses.

This kind of trading strategy that was always unfavorable in the gambling industry, after getting the real New York Stock Exchange to trade stocks, bankruptcy taught Livermore the first painful lesson in his life.

It's painful!

So Livermore changed his investment strategy.

He will observe many stocks at the same time. When they only fluctuate within a range, he will only choose to wait and see.

But if one of the stocks falls below the lowest point of the hole range, which is the support level, he will start to short the stock in large quantities, causing it to attract the attention of more stock holders and cause these people to panic. They will choose to cut the meat and sell the stock that has been declining.

Investors who follow the herd will sell more and more people because of the decline of this stock, creating a stampede effect and selling, and Livermore's short selling will make a lot of money.

Livermore's net worth increased to $24 when he was 5 years old.

This investment strategy is what people later often talk about in stock analysis: chasing the rise and killing the fall.

However, his cautious trading principles also caused him to miss a monster stock that year.

Livermore sold this monster stock just as it took off.

As a result, it increased from 40 knives to 240 knives in the subsequent period. . .

This allowed Livermore, who sold the monster stocks early, to make nearly eight times less profit.

It is precisely because of this incident that Livermore summed up a principle of his own investment and trading. If the stock you bought has been making money, don't be in a hurry to sell it.

When David saw this, he felt that this principle summarized by Livermore seemed to have been said by others in his memory.

Of course, this does not mean that the investment in your hand has been making money and it must be held until the end of the world.

It just means that you have to fight your own instincts, control your emotions, and control the inner level of emotions that affect your trading.

David thought for a while, turned the pages of the book in his hand, skipped the fragments of his personal life experience in the book, and directly found all the investment principles that Livermore had spent his life summarizing.

He took out a small notebook and wrote it all down.

That is, having knowledge of the fundamentals of economics and economic conditions is necessary to understand what effects certain periods of time may have on markets and stock prices.

Remaining patient and willing to let go and let the profits grow are the essential qualities that distinguish outstanding traders from ordinary people.

Observe and only look at factual information.

Memory, remembering key events to avoid repeating them.

Mathematics, understanding numbers and fundamental data, and using them as a basis for calculations and judgments.

Experience, learn from your past mistakes and reflect on new insights.

Avoid frequent trading. When the stock market lacks good opportunities, retreat to the sidelines and be a bystander. You can constantly observe small fluctuations again and again, so that you can better see the major changes that may occur in the market.

Concentrate your efforts on operating the leading stocks with the strongest upward momentum in the bull market, rather than spreading your investment across the entire market, avoiding stocks with low trading volume and weak stocks in those industries.Because of weakness, stocks that have fallen in price always have a hard time recovering.

Among the leading stock groups, if a certain stock performs exceptionally well, some stocks in the same group will also perform well.This is a very important factor in price action, so traders should look at multiple stocks in the same stock group at the same time and pay close attention to their movements.

If a certain group of stocks is showing weakness in a strong market, any stocks in that group should be avoided.

Heuristic operating strategies can be tried.

Before entering the market, the wisest thing to do is to first understand the trend of the market. Market data will integrate the future into your eyes. This is why it is difficult to accurately predict which direction the market will develop in the future.

The market always does what it wants to do and not what traders expect it to do.

So go long in a long market and go short in a short market.

If the market consolidates sideways, hold your funds and retreat to the sidelines until a signal comes to confirm that the trend is moving in a certain direction.

It is always difficult to discover market trend changes, because it will always run counter to traders' current thoughts, which is why Livermore began to use exploratory operating strategies.

Therefore, with proper capital management planning, it is very important to decide how many shares to tentatively buy and the total number of shares you will eventually buy before actually buying a certain stock. This is also what Livermore said. one of the important rules.

First establish a position and test the stock you are optimistic about. This is the exploratory operation strategy.

The purpose is to observe preliminary research and verify whether it is correct.

If its trend is in line with previous judgments, buy more.

The prices of stocks purchased one after another will definitely get higher and higher. This strategy sounded very unconventional in Livermore's era.

Because most people believe that to buy low-priced stocks, you need to take advantage of dips, rather than buying higher and higher, and buying higher and higher.

But Livermore, who has taken a different approach, believes that while buying higher and higher, if the stock price trend proves that the trader is right, he should buy more to take the investment benefits to a higher level.

Livermore would always flatten the price on the way up, rather than flattening the price on the way down.

book.

At the end of the book, Livermore told readers two pieces of advice he summarized.

Accept your losses and exit as soon as possible to protect yourself and not be too affected by wrong decisions. You can lose up to 10%!

Don't easily believe the gossip and inside information given by others, do your own research, only look at the facts, understand the market fundamentals, and make your own judgments.

After recording this, David put down his pen.

Livermore's set of investment and trading principles will not be outdated even in the 100st century 21 years later.

He is indeed the biggest myth of Wall Street in the 20th century!

Whether his followers or his fierce enemies, they all admit that Jesse Livermore is one of the most outstanding stock market traders.