How to Trade In Stocks, by Jesse Livermore, is “The classic formula for understanding timing, money management and emotional control.”
So pay attention and let’s review the success secrets of a stock market legend.
And in case you didn’t know:
Jesse Livermore is the real-life Larry Livingston, featured in Reminiscences of a Stock Operator! He was often known as the “Boy Plunger” and “The Great Bear of Wall Street.”
“How to Trade in Stocks” goes beyond the biographical and reveals to you the exact techniques that the real Jesse Livermore used to build his incredible fortune.
Livermore wrote How To Trade in Stocks shortly before his death in 1940, and at the urging of his son. Prior to this book, Livermore had been very quiet about his trading methods. So this tell-all tale really made a splash.
And since the original publication, How to Trade in Stocks has stood the test of time. The updated version published in 2001 remains popular to this day. So let me tell you a little more about this book:
Why I Recommend Reading “How To Trade in Stocks”
How to Trade In Stocks is a very important book for anyone who is interested in actively trading stocks. And if you haven’t read this book, here are a couple of very good reasons you shouldn’t pass it up.
How To Trade in Stocks provides you with a best-practice framework for technical analysis (or, speculating, as it might be). I was actually surprised at how much the lessons were still applicable today, even though Livermore was using them in the 1920s. But the lessons he gives you about price action are incredibly instructive.
Livermore actually goes into quite a bit of detail about all the things you should consider when you’re buying and selling a stock. And although Livermore is primarily a speculator, one of the first things he says is that you should have a fundamental basis to guide your stock selection. After that though…
How To Trade in Stocks deals almost entirely with technical analysis and price action. Livermore shares on trick after another that he used to increase his probability of success in the stock market.
Livermore was very focused on making a profit right from the start. He goes to extraordinary length to describe what circumstances you should look for to maximize your profit from the get-go. It’s a critical lesson for any aspiring day traders.
And although Livermore was often in and out of stocks quickly, he shares how he made a lot of his money riding core positions for extended periods of time. He traded in and around the changes or price to further boost his returns. And he wasn’t afraid to get long or short depending on what the market was telling him.
I don’t want to give the whole book away, but How To Trade in Stocks is a pretty thorough guide on how you can read stock market behavior, analyze leading sectors, time market entries and exits and control your money and your emotions (easier said than done).
Each section of the book builds on the prior information. And the Top Down Trading techniques are must-read material for any aspiring traders. There is a lot of time-tested advice about trading execution and emotional resilience, both of which are equally important. The back of the book even contains a summary of trading rules that you can easily reference each day to make sure you’re staying on track.
How to Trade In Stocks also has some cool pictures of Livermore and his family. Although he was a very rich and successful man, it seemed Livermore suffered from some mental health issues and some of the biographical information in the book is actually quite fascinating.
And on that note:
Best Thing About “How To Trade in Stocks”
One of the things I liked most about How To Trade in Stocks is the realistic approach it took. Although Jesse Livermore was quite successful, he did not have an easy climb to the top. And the book is very candid in sharing the ups and downs of life as a speculator.
How To Trade in Stocks highlights more than one occasion where Livermore loses it all and had to start over from scratch. I can’t imagine how stressful this would be, and it makes you wonder if that pressure was a factor in Livermore’s battle with depression. Regardless…
I appreciated how the book did not glamorize the life of Jesse Livermore, even though it would have been easy to do. Of course by the end of the book Livermore has a much better grasp on risk management than when he begun. But the feeling that it could all slip away serves as a subtle reminder to the reader that risk in trading is real, even for the most successful speculators.
There’s just one more thing I want to mention in this book review
What You Need To Know About The Livermore Market Key:
The Livermore Market Key is hailed as “the first and still one of the most accurate methods of tracking and recording market patterns.”
How To Trade in Stocks shares this key and professes it will help you have a better handle on the market. And while it’s definitely an interesting technique, I must say I found the rest of the book far more applicable. The truth is…
How To Trade in Stocks has tons of great information and the Market Key is just a little bit antiquated. It’s basically a methodology for watching stocks and determining when to buy and sell based on their price momentum. I think learning the market key theory was valuable, but…
Because Livermore was working in an age when charts didn’t exist yet, the table-format he uses to track stock price-action is a little confusing. Today, we have so many more tools at our disposal than Livermore could have ever fathomed. And the manual tracking that the Market Key requires, is probably a little bit unrealistic, given the other tools we have available today.
How To Trade in Stocks – The Final Word
How To Trade in Stocks is a fantastic book. And even though the market key is a little bit out of date, the rest of the book is incredibly useful and provides a time-tested approach to technical analysis in it’s purest sense.
How to Trade in Stocks is also a very quick read. So you can absorb ad apply Livermore’s secrets very quickly. Today, you can buy How to Trade In Stocks on Amazon and save 37%.