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Most valuauable books for understanding the logic of markets?

  • #21
  • Mar 6, 2016 3:27am Mar 6, 2016 3:27am
What I Learned Losing a Million Dollars (Columbia Business School Publishing) is probably one of the best books about how to understand the markets and its participants. I'm always surprised it's not mentioned more.

The Market Wizard books are only so-so in my opinion. Yes, the interviews are interesting but I think they're all sort of weak when it comes to offering actionable information. But I still read a chapter here and now.

The new Livermore book is much better than the original. The new one has the same copy as the original but adds in far more details about the times and the characters in the market. Livermore was such an action junky it was no surprise he topped himself with much of his fortune gone. How he must have made his brokers and the market makers rich with all his trading at those high comms and high bid-offer spreads. Niederhoffer argues, and I think correctly, that it was impossible for Livermore to keep the big profits he earned over his lifetime due to the heavy trading costs of the time. Think about this point because on one hand you clearly had a brilliant trader, and one it seems with no fear, yet that wasn't enough...
Road To Wisdom? To err and err and err again, but less and less and less...
  • #22
  • Mar 7, 2016 7:06am Mar 7, 2016 7:06am
John Magee: The General Semantics of Wall Street
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  • #23
  • Mar 9, 2016 7:05am Mar 9, 2016 7:05am
Quoting Calculus
Livermore was such an action junky it was no surprise he topped himself with much of his fortune gone. How he must have made his brokers and the market makers rich with all his trading at those high comms and high bid-offer spreads. Niederhoffer argues, and I think correctly, that it was impossible for Livermore to keep the big profits he earned over his lifetime due to the heavy trading costs of the time. Think about this point because on one hand you clearly had a brilliant trader, and one it seems with no fear, yet that wasn't enough...
You are trying to explain away Livermore's success with your own speculation rather than accepting the highly plausible account and reasons recorded in Reminiscences.

Say, have you considered a career as a fundamental analyst?
  • #24
  • Mar 9, 2016 7:21am Mar 9, 2016 7:21am
Atokys, not really, I'm relying mainly on Victor Niederhoffer's analysis of the man and his methods. Apart from his obvious failings in risk management, Niederhoffer is not only a brilliant trader but a brilliant man in many other things, one where most of us can learn a great deal from in both markets, sports and life.

I would encourage everyone to read his blog, he's got a good following with many other good people who are regular posters. Birds of the same feather tend to flock together.

And no, I haven't considered a career as a fundamental analyst. Sorry but I haven't a clue what you're on about.


http://www.dailyspeculations.com/wordpress/
Road To Wisdom? To err and err and err again, but less and less and less...
  • #25
  • Mar 9, 2016 7:47am Mar 9, 2016 7:47am
Quoting Calculus
Atokys, not really, I'm relying mainly on Victor Niederhoffer's analysis of the man and his methods.
Ok. I rather just appreciate the book without being over-analytical. All the key lessons are layed out in plain view for the reader.
Quote
Livermore was such an action junky it was no surprise he topped himself with much of his fortune gone.
The reasons behind his multiple bankruptcies are clearly stated. Far from him merely being an 'action junky'.
  • #26
  • Mar 9, 2016 8:22am Mar 9, 2016 8:22am
Quoting Atokys
{quote}Far from him merely being an 'action junky'.
It was the fact that he was an action junky that made it so hard for him to keep his money, if not impossible.

In those days you were trading stocks with a 1/4 or more bid-offer spread alongside very high FIXED commissions, nobody was allowed to discount them. So when you add in that sort of vigorish it's hard if not impossible to come out ahead after a long period of time however good you may well be. That is Niederhoffer's point and few understand the real costs and subtleties of the vig overtime than him.

Nobody is suggesting that Livermore wasn't a brilliant trader. The point I was making was that in his day and with his style of trading that wasn't enough because of the costs involved. Today it might be a different matter, penny bid-offers for many stocks and heavily discounted comms, total dealing costs he could only dream about.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #27
  • Mar 9, 2016 8:37am Mar 9, 2016 8:37am
Quoting Calculus
It was the fact that he was an action junky that made it so hard for him to keep his money, if not impossible. In those days you were trading stocks with a 1/4 or more bid-offer spread alongside very high FIXED commissions, nobody was allowed to discount them. So when you add in that sort of vigorish it's hard if not impossible to come out ahead after a long period of time however good you may well be. That is Niederhoffer's point and few understand the real costs and subtleties of the vig overtime than him. Nobody is suggesting that Livermore wasn't...
*Scratches head*

Nothing about Livermore characterizes him as an action junky. All his plays, even when he was really young, were characterized by very meticulous study and an almost inhuman indifference to monetary losses.

His backruptcies (hopefully, in order) can be attributed to:
- Not having bucketshop-like execution when directly participating in the market for the first time.
- Stubbornly holding a losing position believing that his interpretation of underlying conditions was infallible.
- Cutting winners short and holding losers and then attempting to make-it-back.
- Depression. The final crisis that ended his career and life really had nothing to do with markets.
  • #28
  • Mar 9, 2016 8:44am Mar 9, 2016 8:44am
EVERYTHING characterises him as an action junky.

For example, only an action junky would trade the size he put on in regards to his overall account.

Only an action junky would say something like 'when you're right you can never be too large' (or something like that).

Then you have the amount of trading he did, he wasn't some buy and hold investor you know.

Why do you think all his brokers were happy to lend him money all the time after he went broke? It wasn't because they liked the man, although they may well have. It was because he was a major money earner for them via his comms. They knew it wasn't really a loan as they'd make the cash back just on his costs.

On Wall Street they'd extend credit to the Devil if he traded a lot.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #29
  • Mar 9, 2016 9:01am Mar 9, 2016 9:01am
Quoting Calculus
EVERYTHING characterises him as an action junky. For example, only an action junky would trade the size he put on in regards to his overall account.
Only an action junky would say something like 'when you're right you can never be too large' (or something like that).
Those statements literally do not imply that he was an action junky.

'Action junky' connotes seeking action for the sake of excitement or entertainment. Livermore studied his approach and he knew the risk he was taking. Putting on a large position knowing full well its implications is not being an action junky.

Livermore even mocks the traders who ARE action junkies that participate in active stocks merely to play the wild fluctuations.
Quote
Then you have the amount of trading he did, he wasn't some buy and hold investor you know.
Certainly.

He was a scalper during his bucketshop days.

He was a short-term swing trader in his early career.

At his apex he was a full blown trend trader.
Quote
Why do you think all his brokers were happy to lend him money all the time after he went broke? It wasn't because they liked the man, although they may well have. It was because he was a major money earner for them via his comms. They knew it wasn't really a loan as they'd make the cash back just on his costs. On Wall Street they'd extend credit to the Devil if he traded a lot.
His brokers made a living from him. He made a great living from the market.

Win. Win.
  • #30
  • Mar 9, 2016 9:05am Mar 9, 2016 9:05am
Quoting Atokys
{quote} Those statements literally do not imply that he was an action junky. 'Action junky' connotes seeking action for the sake of excitement or entertainment. Livermore studied his approach and he knew the risk he was taking.
if that's how you define action junky then yes, I agree with you, he was far from an action junky.

The problem appears that we define it differently therefore we are both right in our own views but wrong in the case of our opposing views.

Nice debating with ya anyway, but I'm off back to the market
Road To Wisdom? To err and err and err again, but less and less and less...
  • #31
  • Last Post: Mar 9, 2016 9:15am Mar 9, 2016 9:15am
Quoting Calculus
{quote} if that's how you define action junky then yes, I agree with you, he was far from an action junky. The problem appears that we define it differently therefore we are both right in our own views but wrong in the case of our opposing views.
Just go read the actual book, its pretty good. It also gives the impression that Livermore was everything but how you described him. Anyway, thanks for reminding me to stay away from inaccurate abridged versions.
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