Jesse Livermore was famed for making several multimillion-dollar fortunes and losing them during the stock market crashes of 1907 and 1929. The material presented in this book was obtained by Richard D. Wyckoff through exclusive interviews with Jesse Livermore.
This is a ‘must read’ investment book in which Jesse Livermore gives his opinion of what makes a successful investor. He strongly believes that knowledge and patience are the two most important things required for an investor to be successful. He states that anyone with the desire can acquire these skills. He spends a lot of time discussing how to best acquire this knowledge, and believes this knowledge is not market noise or market tips, but rather personal research which must be done in a very disciplined and methodical manner. Patience is then discussed in terms of once you have done your research, you then need to wait for the right time to enter the position. Patience is also important for letting your winners run and not selling winning positions too early.
Another section that I found very interesting was his discussion on entering and exiting stock positions. He was a great believer in adding to winners and cutting losers and discusses in detail how an investor needs to scale into winning positions and should not average down. He discusses market ‘hope and fear’ and how an investor needs to cut losing positions early. He discusses the opportunity cost of sitting on positions that are not going in any direction and how these need to be sold from one’s portfolio.
Jesse Livermore believes that he lost his fortunes due to breaking his own investing rules of not cutting losing positions early and by listening to market noise and tips. The thing that strikes me most about this book is that one hundred years on this investment advice is as relevant now as it was back then.