The book Reminisces of a Stock Operator is about a boy named Larry Livingston and his up and down life playing in the stock market. As a child Larry starts out working as a quote boy in the bucket shops of Boston helping people purchase stocks and to make bets on them. After doing this for awhile, Larry realizes he has a knack for understanding stock patterns and price movements. Larry quits his quote boy job and begins making bets in the bucket shops. Larry makes a killing making the bets and earns $1000 by the time he is 15 years old. He becomes so good at it and makes so much money he becomes officially banned from the bucket shop forever.
After becoming banned, Larry heads to Wall Street where he tries to do small term bets on stocks. However, Larry has little capital compared to the big hot shots so it isn't long before he ends up losing all of his money. This is partly due to the fact that the orders he places take so long to go through, its hard to make much profit on the short term bets because the price is always changing so much.
Larry then heads to St. Louis to find more bucket shops to make more money and does so quite quickly. After becoming banned from all of the St. Louis bucket shops he heads back to Wall Street only to lose all of his money again. After the upsetting loss, he had found a few unethical stock exchanges in Boston and took advantage of their scamming to make very high profits.
With his new earnings, Larry heads back to Wall Street for a third time with a new approach that he found to be much more efficient. He found that buying on a rising market and selling on a bearish market was most efficient and decided to set his principles on this. Larry made a killing in this and became well known. He had then set out on vacation buying a few yachts and fishing trips and became very intrigued in the cotton industry. He had been convinced buy a cotton trader to purchase stocks even though the market was bearish, which had cost him. He had lost thousands of dollars, and instead of taking the loss he went against his principles and started doubling down, only to lost all of his money again.
Larry had made many poor decisions after and had become taken advantage of by a stock brokerage that was trying to make a profit off him and to protect their clients. After going through this experience, Larry concluded in his thoughts that ones own susceptibility to emotional responses are just as important to understanding the market. Larry had made many poor decisions going against his principles and his effort to rally the market while it was bearish hurt him greatly. He had once again, lost all his money and was left with no other option but to file for bankruptcy.
Larry then becomes very sick and ill after his poor decision making, which could have been induced from the stress of losing that much money after all of his hard work. After he recovers from his illness and his bankruptcy he decides to get back out on the market. Larry contacts and old friend and receives a favor and gets on a small stake that ends up earning him a heaping profit from it due to the price surge of the company from World War 1. He pays off his debts with much leftover and decides to accept a position as a stock operator. His job as the operator is to manipulate the stock and sell bad shares for a good price and learns many good strategies for selling them.
Larry talks about his effective strategies compared to other famous operators. Many of the famous operators would often base their strategies off tips and spread rumors about them as much as possible in order to sell off the bad stock. Larry however, emphasizes that instead its best to trade in the market in such a way as to give other traders certain impressions of what is happening with that stock and to induce them to buy or sell whatever it is he is pushing for.
One of the most important lessons he explained was later on in the book dealing with tips. He explains that you should often not listen to any types of tips you hear out on the street or from others because they are often used to fool the public. These tips get out in order to get more people to buy or sell a position when in fact they help the insiders earn a heavy profit while hurting the public investors. I found this to be very fascinating and although its illegal to inside trade nowadays, I believe that the tips are still used to manipulate the public and you should only base your decisions on the market conditions, specific company information, and your own gut instinct. Which is exactly what Larry had realized much later on in his life.
Larry also reflects back on his disapproval of the conflict of interest that brokers have in regards to selling to people on commissions. Their goals of trying to sell whatever they can whether or not it's in the interest of the investor is very dangerous and unethical. Brokers would often sell cheap or declining stocks to people just to earn the commission even though they knew it was going to capsize. Due to new laws regulating against brokers manipulating clients these problems are much less common today, however I do find it something to be aware of.
One last point that I was intrigued of by Larry was his disapproval of buying stocks that are within ranging markets. His idea of buying on solid stocks and selling on declining stocks that are well established and are showing strong signs of growth are very fundamental and safe. I do find myself curious as to how Larry would work in the market today in regards to safer laws, and the new and improved stock options.
Overall I thoroughly enjoyed reading through this book as I was able to relate to him on working his money up and all of a sudden losing all of it on risky stakes mainly because I have done it myself a time or two. For him to keep working his way back and to learn from his mistakes is a good way of kind of going through it yourself with him and develops a solid understanding for how the market works and offers solid advice that can still be used today.