Remove The Noise From Your Trading.
I kept my business to myself. It was a one-man business, anyhow. It was my head, wasn’t it? Prices either were going the way I doped them out, without any help from friends or partners, or they were going the other way, and nobody could stop them out of kindness to me. I couldn’t see where I needed to tell my business to anybody else. I’ve got friends, of course, but my business has always been the same: a one-man affair. That is why I have always played a lone hand.
A man must believe in himself and his judgment if he expects to make a living at this game. That is why I don’t believe in tips. If I buy stocks on Smith’s tip I must sell those same stocks on Smith’s tip. I am depending on him. Suppose Smith is away on a holiday when the selling time comes around? No, sir, nobody can make big money on what someone else tells him to do. I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgment.
Jesse Livermore – Reminiscences of a Stock Operator
Technology and the way we access the markets have changed a lot since 1923 when Reminiscences was first published. But the basic human characteristics like fear and greed, the driving forces behind market participants’ actions, have remained pretty much the same. A quick reminder for those who think that laptops and iPhones automatically make us more financial savvy: this month marks seven years since Bernie Madoff‘s Ponzi scheme unraveled. Madoff’s victims lost $18 billion, 53 times the $225 million (inflation adjusted) losses of Ponzi’s scheme. How’s that for evolution?
Along with the trading volumes and the number of financial instruments available, the noise surrounding traders and investors has increased tremendously over the years. We now have 24/7 financial television like CNBC or Bloomberg, scores of websites with up to the minute news and frequently updated chart analyses and commentaries, forums and social trading platforms.
On the face of it, all these services should be very helpful. I mean, having access to the latest news, hearing the comments and analyses of various ‘experts’, interacting with fellow traders and following/copying ‘top traders’ – how can you go wrong ? Very easily. Most of the news is either irrelevant to the instruments you trade or are already priced in. The talking heads and the ‘experts’ on websites are not traders – they’re being paid to fill up air-time or web pages, not to deliver risk-adjusted trading performance. Good quality information in forums and social trading networks? – that’s about as easy to find as a needle in a haystack.
There’s a very brief book (32 pages), Jesse Livermore’s Methods of Trading in Stocks, written by Richard Wyckoff. He describes how Livermore traded out of his private office in order to insulate himself from the distractions of the customers’ room in a large brokerage. The modern equivalents of those distractions have just been mentioned above. And once we recognize them for what they really are, nowadays it’s much easier to avoid them.