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In 1929, just before the great depression, Jesse Livermore was praised as a legend.
While the rest of Wall Street drowned in panic, Lemmore had taken a major short position and ran away with more than $ 100 million profit.
Newspapers called him ‘The Boy Plunger’. His wife, it is said, was afraid to tell her friends how much money they had earned. It felt indecent.
But here is the turn. Less than a decade later, Liermore was brutal.
And this was not his first fall. It would also be his last.
Lemmore made and lost several fortunes during his life. His story, which is partly genius and partly tragedy, is taken prisoner Memories of a stock operatorA fictional report of his life written by Edwin Lefèvre.
Although the main character is called the name ‘Lawrence Livingston’, the story closely reflects the realistic journey of Livermore through the highlights and lows of Wall Street in the early 20th century.
Don’t be fooled by the title of the book (“Stock Operator”). The wisdom it offers is timeless. I am not a trader, but I think every serious investor should read this book. It teaches you all the ways in which you can lose money in the markets, and which I believe it is a larger lesson than that to make money.
The life of Livermore can feel far away, but the emotional patterns he observed are as current as always. Markets have changed. Not human nature. So what can we learn, as modern investors, from a man who rode the waves of Wall Street a hundred years ago? I think, enough.
What follows are some of the deeper investor lessons that I have learned from the book. These are lessons that you can (hopefully) save, part of the pain that Liermore had to endure to learn them.
Let’s start here.
1. Sitting still is an active strategy
It was never my thinking that the big money made for me. It was always my sitting. Do you have that? I’m tight!
One of Lemmore’s most famous and overlooked insights is the power to do nothing.
Most investors believe that their lead is in more. But Lemmore learned in the hard way in which it is not about tracing the chance. Many can do that. It is about keeping your investments when each part of you wants to act.
We all notice that markets are noisy. But we rarely notice that our mind is even noisier. When stock prices fluctuate and doubt the penetration, the temptation to act, or to do something, becomes overwhelming.
But Lemmore reminds us of his experiences and mistakes that money is not made in motion, but in conviction.
This is a difficult truth for modern investors constantly refreshing apps and consuming updates per hour. The paradox is that in a world that moves faster than ever, your biggest advantage may be your ability to slow down … and sit still.
2. Tips are toxic, even when they work
Tips! How people want tips! They not only crave them, but to give them. There is greed involved and vanity. It is sometimes very funny to see really intelligent people fishing for them. And the tip-giver does not have to hesitate about the quality, because the tip seeker is not really after good tips, but after a tip. If it’s okay, fine! If that is not the case, more luck with the next.
Tips are exactly that. Tips. Following blindly is you setting up for epic ruin. First of all you have no idea in which position in which Tipper is located. He may not even contain the stock he recommends. Even if he is, you have no idea when he will unload his fate. Suppose he sells his shares to you. Then you would be forced to dump it up to someone else for a higher price.
Lemmore had strong words for the culture of tips, and for a good reason. He looked at how countless traders cheer themselves.
A tip feels like a shortcut around the hard work of thinking, understanding and taking responsibility. But tips are dangerous, not only because they are unreliable, but because they remove you from the decision -making chair. You act according to someone else’s conviction, or worse, according to someone else’s manipulation.
Even worse, most tips do not come with context. You do not know the tipper’s time horizon, portfolio allocation, risk appetite or motif. You don’t know if they buy or unload. And even if the tip turns out to be the same, you don’t know Why It worked, which means that you learn nothing.
Lemmore’s advice here is that you only have to exchange when your analysis leads you there and that you must have all your decisions.
If you have to ask: “What should I buy?”, You are not ready to buy something.
3. Human nature is the only constant market
The game does not change and the human nature does not.
Markets have evolved since the days of Livermore. Financial instruments have also become more complex. But human nature, the underlying software that markets markets, has remained the same.
Now his greed, fear, envy, hope, recklessness and herded behavior are not bugs in the system. She Are The system. And Livermore realized through endless Cycli of Boom and Bust that the real game did not predict the prices, but anticipated people.
Even although every crash feels new and every bubble feels different, they are not. Lemmore repeatedly repeated the same behavior, only with new actors and costumes.
The lesson here is that if you want to be a better investor, the markets will not only study. Study yourself and others. See how people behave under pressure, during euphoria or in denial. The investor who understands psychology has a lead that does not fade with technology.
4. Don’t waste lessons of your losses
There is nothing like losing everything you have in the world to teach you what you shouldn’t do.
Lemmore knew the loss intimate. He went bankrupt several times. Yet to his honor he has won his failures for insight. He believed that you learn little from winners, because if it goes well, you assume you are right. They are losses that force introspection. Pain is a really powerful teacher, only if you want to listen.
He went so far to say:
Being broke is a very efficient education agency.
But the catch here is that education is only useful when applied. Many traders and investors lose money just to repeat the same mistakes from denial or ego.
The advice of LIMEMORE is clear: if you lose, you consciously lose. Take the lessons. Change your approach. And above all, your losses will not be lost.
5. Respect the market. It owes you nothing
On the evening of November 28, 1940, Livermore finished his life with a self -inflicted shot wound.
When the police arrived, they discovered a suicide note. The note was addressed to his wife, Harriet, whom he lovingly called ‘Nina’. In it he wrote:
My dear Nina: can’t help it. Things have been bad with me. I’m tired of fighting. Can no longer continue. This is the only way out. I am not worth your love. I am a failure. I’m really sorry, but this is the only way out for me. Love Laurie
So much for his inheritance of timeless lessons, the life of Livermore is also a warning story. He was brilliant and a lot ahead of his time in reading stock prices and understanding crowd psychology. But he also surpassed, flooded and underestimated his own fragarities. His last years were filled with financial and personal despair, which ultimately led him to take his life.
It is important to remember this … not to judge him, but to learn. The market doesn’t matter how smart you are. It doesn’t owe you anything. And if you start to believe that you are invincible, it will find a way to remember you differently.
The last years of Livermore were filled with unrest. And that is the part of the story we should pay attention to. It was sad, but it was real. There is a thin line between trust and arrogance, and the market punishes those who cross it.
So what should we really take from this? If I had to cook it down, I would say this:
- Be humble,
- Be patient,
- Think for yourself,
- Accept that losing are part of the game, and
- Don’t let your ego write that your portfolio cannot cash in.
In the end, markets are not only mathematical, they are psychological, emotional and human. And the better you understand those parts, the better you will do.
You do not have to act like Liermore. In fact, you probably shouldn’t do that. But you should definitely learn from him. His victories and mistakes are instructive. And his reflections are timeless. Read them slowly. Let them sink. And the next time the market tests your patience or your conviction, remember the words of Liermore:
There is nothing new on Wall Street. It cannot be, because speculation is as old as the hills.
The players change. The stories evolve. But the game, and his lessons, remain the same.
Two books. One goal. A better life.
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“Discover the extraordinary on the inside.”
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“This is a masterpiece.”
—Organ Housel, author, psychology of money
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