I interviewed over 30 renowned contemporary investors asking them the same several questions. In particular, I was interested whether they can point out the book which made a profound impact on them and which is highly recommended to novice traders. The most of the interviewees mentioned Reminiscences of a Stock Operator, the book published in 1923.
What makes the book timeless? Specifics of a securities trader’s mindset, errors, lessons learned from trading experience, and epiphanies are described with utmost accuracy. From my viewpoint, this accuracy appeals to people.
The readers, who have their own experience of stock trading, find a lot of familiar and clear things. They understand ideas and story of Larry Livingston, who had a prototype, legendary speculator Jesse Livermore. The story is presented so realistically that most readers are certain that Edwin Lefevre is the nickname taken by Livermore himself.
However, this is wrong. Edwin Lefevre is a real name. He was an American journalist, columnist, and author of novels and short stories. His Reminiscences of a Stock Operator had been first published in the weekly periodical Saturday Evening Post before it was released as a book. It is hard to believe, but Edwin Lefevre never worked on a trading floor. He was a gifted writer with a remarkable insight into the human nature. His son recalls that every day Lefevre came into business contacts with a lot of people with different backgrounds such as bank clerks, taxi drivers etc. All these people were quite open to him and gladly shared their life stories. Lefevre spent a few weeks communicating with Livermore. Interestingly, he never saw the latter making his speculations. So the book appeared as a result of such private talks.
Reminiscences of a Stock Operator is full of valuable observations on markets and trading. Some of episodes belong to the Wall Street folklore. For example, «Prices are never too high to start going long and never too low to start going short». The book is so splendid that it is difficult to choose a quotation. Nevertheless, I would like to cite the following wise statement, “I did quite the opposite. Cotton brought me losses but I kept it. Wheat was trading at a profit, but I sold it. The worst mistake for a speculator is to cling to a losing trade. It would be the right thing to sell an asset that causes losses and keep an asset that brings a profit”.
Any seasoned trader will easily recall similar situations in their own trading experience. Any novice trader can pick up a lot of practical tips. The book contains a lot of things which can be and should be used in trading. Those readers, who will be able to grasp the lessons taught generously in the book and who will follow them, will enhance notably their trading expertise. The rest of the audience will surely have a great time reading the smart and well-written book.
What is a classic? In my opinion, a book proves to be classic if it is appreciated by several generations thanks to its unique contents and style. Sometimes, a book enjoys popularity for centuries. Therefore, Reminiscences of a Stock Operator is a genuine classic. Published in 1923, the book is still recognized as one of the most popular works in financial literature. No doubt the book will be widely read and used as valuable guidelines far in the XXI century. Moreover, if I were asked what books on finance will be still of practical merits at the end of the XXI century I would put Reminiscences of a Stock Operator on top of the list.