Reminiscences of a Stock Operator

I read a lot of personal finance books. Most possess a certain sameness. They offer good advice, yes, but there's nothing special about them. Perhaps that's why I'm drawn to two specific types of financial books: narratives and histories. If a book can combine both of these elements, it's a good bet I'm going to like it.

Between 10 June 1922 and 26 May 1923, The Saturday Evening Post published a series of twelve articles by journalist Edwin Lefèvre. These stories, collectively entitled “Reminiscences of a Stock Operator”, told the thinly-veiled biography of stock-market speculator Jesse Livermore, and were published as a book by the same name later in 1923.

Reminiscences of a Stock Operator gives the first-person account of the career of “Lawrence Livingston” (a slightly fictionalized Livermore), who, just out of grammar school, goes to work as a quotation-board boy in a stock-brokerage office. (This was during the 1890s, one hundred years before the advent of real-time internet stock quotes. Stock quotes had to be written on a chalkboard!)

Livingston develops a feel for the stock market and, in time, begins to speculate. He's not an investor — he's a speculator. He gambles in stocks. And he does a good job of it, too, building a million-dollar fortune during his twenties. But then he loses everything. In fact, Livingston builds — and loses — several million-dollar fortunes between 1901 and 1921. And each time he makes a mistake, he extracts a lesson.

I never thought stories of stock-market trading could be so entertaining. I was wrong. The book does contain plenty of mumbo-jumbo about stock prices, but most of the time it's entertaining — and educational. Here are just a few of my favorite passages:

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It was never my thinking that made the big money for me. It was always my sitting. Go that? My sitting tight!

[…]

Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.

[…]

Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity…It has always seemed to me the height of damfoolishness to trade on tips…The belief in miracles that all men cherish is born of immoderate indulgence in hope. There are people who go on hope sprees periodically and we all know the chronic drunkard that is held up before us as an exemplary optimist. Tip-takers are all they really are.

[…]

There is profit in studying the human factors — the ease with which human beings believe what it pleases them to believe; and how they allow themselves — indeed urge themselves — to be influenced by their cupidity or by the dollar-cost of the average man's carelessness. Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was.

[…]

The sucker has always tried to get something for nothing, and the appeal in all booms is frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably find that it cannot be found on this sordid earth.

At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860s and '70s than in the 1900s. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.

I actually dog-eared more than 20 pages, but don't have room to reproduce all of the good stuff here. If you're interested in an extended glimpse of this book, you can preview the text at Google Book Search.

I loved Reminiscences of a Stock Operator. Though the stock market is a much different place than it was during the early 20th century, most of the principles described here still apply. Plus, it's filled with entertaining anecdotes and practical descriptions of how stock speculators operate. This book won't appeal to everyone. But if, like me, you enjoy inside glimpses of how the stock market operates, try to find a copy at your local library.

Postscript: I've begun to collect old finance books. I would love a 1923 or 1938 edition of this, but I'm not interested in paying hundreds of dollars. If you ever see a beat-up old copy, please let me know.

More about...Books, Investing

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
19 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
DDFD at DivorcedDadFrugalDad
DDFD at DivorcedDadFrugalDad
11 years ago

I have read this one . . . not a bad read for those interested in the market. Thanks for sharing!

Sonny
Sonny
11 years ago

I’m new to the site and found out about it through your interview with Flexo. Your interview was great by the way. Sorry my first comment has to be rather negative but I own this book and I got to say I wasn’t thrilled with it from trading perspective. It was interesting as a history book goes but didn’t live up to the hype. What he says in the book is so generic and in my opinion rather useless. This is a guy who traded stocks left and right but he wants to tell me sitting tight was his best… Read more »

Aman@BullsBattleBears
11 years ago

sounds like my kind of book! thanks for the share 🙂

Eden
Eden
11 years ago

It’s a great book. I started reading it recently too. I’d say it’s a must read for anyone who wants to be a trader and an entertaining read for anyone else.

Paul
Paul
11 years ago

When wildly successful traders are asked what books they recommend, had a profound effect on them, a beginning trader should read, etc., this is one of the few books that is consistently mentioned.

As an aside (I don’t think this is detailed in the book): Livingston made and lost huge fortunes on four separate occasions, after going busto the last time he committed suicide. Which, to me, demonstrates how difficult it is to control your emotions (even when you’ve BTDT four times).

Todd @ The Personal Finance Playbook
Todd @ The Personal Finance Playbook
11 years ago

This is one of those books that I always hear a lot about, but have never picked up. I’ll have to look for a copy next time I’m at the library. I’m currently reading Outliers by Malcolm Gladwell and am really enjoying it. Thanks for the write-up on Livermore, er Livingston.

Damon
Damon
11 years ago

If you like market narratives/histories you my try the biography of Emmanual Derman “My Life as a Quant” He started off as a physicist but went on to model bond yield curvers and work with the likes of Black and Scholes.

Rob Bennett
Rob Bennett
11 years ago

It was never my thinking that made the big money for me. It was always my sitting. Go that? My sitting tight! This quote highlights for me the dominance of emotion over intellect as factors affecting investing success. Intellect can be a plus. But getting the emotions right is more important. And, when you don’t get the emotions right, a strong intellect can actually be a negative (because the wrong emotions will cause the investor to put the strong intellect to work rationalizing bad decisions. Take a look at any money magazine and note the focus of the articles on… Read more »

Dividend Growth Investor
Dividend Growth Investor
11 years ago

It’s a nice book which I have read several times. It is in the public domain now ( i think) so you could get a free online version if you search for the book in wikipedia.

J.D.
J.D.
11 years ago

@Todd (#6)
I also just finished Outliers. I thought Gladwell’s thesis was fascinating (the whole 10,000 hours thing, and the “we’re shaped by our circumstances even if we don’t think we are”), but that it went on far too long. It was like a magazine article stretched to book length. Still, it contained a lot of fascinating anecdotes. I keep trying to think of a way to tie it to personal finance, but I haven’t come up with one! 🙂

Benjamin
Benjamin
11 years ago

Reminds me of my day trading days when I was young and dumb in college! The very first trade that I ever made I double my money, every trade after that I lost, and after about two months of “day trading” all my money was gone…

Lessons learned…BUY AND HOLD! Unless you have “insider information” its very difficult to consistently beat the stock market through speculation!

Paul in cAshburn
Paul in cAshburn
11 years ago

There are as many correct “rules” as there are people and situations. The “rule” I’ve learned is to expect regression to the mean. I once bought a stock at $4 that went up to $6 in two weeks. I sold all shares in order to take the 50 percent gain… and the stock went up to 16 in the next month. (If that was my formative experience, I’d have learned to “sit tight, don’t act”.) I once had an IRA that had appreciated from $120k to $220k and I sat tight and didn’t act… and it dropped to $130k. (If… Read more »

Michael
Michael
11 years ago

That book rules. HOWEVER, remember that in the end he killed himself. His advice is excellent for perfectly dispassionate people, a group to which neither he nor most GRS readers belong.

Congratulations on the office space, J.D. You look cozy.

Paul Muscroft
Paul Muscroft
11 years ago

As this book is out of copyright you can read it for free at the wonderful Internet Archive –

Masked Financier
Masked Financier
11 years ago

Reminisces is indeed a legendary book and one of the staples of investment reading. However, I’m surprised that JD is recommending a book that is often preached as a gospel for how to trade investments actively rather than passively! Also, you will realise that the principles which JD emphasises can be learnt very effectively using poker as a training tool – indeed some of the points bear an eerie resemblance to the lessons of Kenny Roger’s iconic ballad “The Gambler”! Perhaps the biggest lesson of them all is that of sitting and not thinking. Resisting the urge to play a… Read more »

ctreit
ctreit
11 years ago

This is one of my favorite books about trading. Many of its tenets still hold true because they refer to human psychology which does not really change that much over time. It is unfortunate that Livermore’s life and investing history was a roller-coaster all the way through that ended in suicide.

Debbie M
Debbie M
10 years ago

I just read this on your recommendation. It reminds me that I’m not interested in speculating but in investing, which he doesn’t say much about. Even on speculation, there aren’t quite as many clues as I’d like. For example how does he know we’re in a bull market and then that we’re no longer in a bull market? How can he tell which jumps indicate something and which don’t? I really like what he has to say about tips (never trust them, no matter the source). Very convincing, and I’m sure that hasn’t changed over the last century. (News, such… Read more »

Ramaswamy
Ramaswamy
6 years ago

I loved this book. As a dabbler in Stocks I enjoyed reading this book a lot. For those interested, you can read my review of the book in the link below.
http://investments-manofallseasons.blogspot.in/2014/07/book-review-reminiscences-of-stock.html

Ramaswamy
Ramaswamy
6 years ago

I loved this book. As a dabbler in Stocks I enjoyed reading this book a lot. For those interested, you can read my review of the book in the link below. Pl read and give me your views
http://investments-manofallseasons.blogspot.in/2014/07/book-review-reminiscences-of-stock.html

shares