#文章首发挑战赛#
Since the birth of the stock market, countless brains with top computing power have been studying the laws of stock investment one after another, trying to crack the wealth code of the stock market to make money.
Today, there are three main schools of thought: the technical analysis stream, the value investing stream, and the quantitative hedging stream.
In this issue, the president will talk about Jesse Livermore, one of the founders of the school of technical analysis----.
Known as the king of Wall Street speculation, Livermore entered the stock market at the age of 14 with $5 and earned $1,000 the following year. Became a millionaire at the age of 29. In 1929, the U.S. stock market crashed, and at the age of 52, in a pool of blood from countless people fell, he shorted the market and made $100 million in a few days. Livermore is a genius born to trade. But just five years after becoming a billionaire, he went bankrupt, and a few years later, Livermore shot himself, ending his legendary life.
How did Livermore, who only went to elementary school, become a legend who swept Wall Street? Why did such a powerful person go bankrupt so many times? Why did he end up committing suicide?
Below, you'll see Livermore's saga and get a guide to surviving the stock market.
Memoirs of a stock maker ¥29.8 purchase
Livermore's story mainly comes from this "Memoirs of a Stock Maker", which many old investors should have read, the mainland stock market is a retail market, and most investors also follow technical indicators to guide stock trading. Therefore, this book, which expounds Livermore's trading ideas, has been sought after by the majority of Chinese stockholders. But this book is a novel based on Livermore, and there is no lack of romance in it.
Livermore was born in Massachusetts in 1877 into a family of farmers. At the age of 5, he was able to read financial newspapers and magazines and was very sensitive to numbers. During his elementary school years, he mastered math in one year that took his children three years to learn. But at the age of 14, his father forced him to drop out of school. The reason was that his father had also dropped out of school at the age of 14 and had become a farmer, so he wanted Livermore to be like him and now return home to farm. Be a diligent farmer. Livermore was shocked by his father's decision, and at the time, he was obsessed with numbers and finance and wanted to follow the path he loved. After arguing with his father, Livermore chose to run away from home. Before leaving, his mother gave him $5. This is also the start-up capital for his later billions of assets.
Jesse Livermore joined a stock speculation house at the age of 14 and was responsible for recording the real-time price of stocks, earning $5 a week. This kind of speculative house does not really buy and sell stocks, but bets on the rise and fall of stock prices. It is equivalent to a peripheral casino with the stock market as the handicap. Gamblers can place bets at any time and settle at any time.
Speculative banks can not only earn high transaction fees, but also have a probability advantage, and they are almost guaranteed to make a profit. The probability that gamblers guess correctly is well below 50%. Even if you can guess correctly this time and keep playing, sooner or later you will still make mistakes. The psychology of gamblers is the same, greed and fear, when they lose, they want to turn over, the more they gamble, the more they lose, and when they make money, they are unwilling to stop, as long as they encounter a small stock price fluctuation, they will be "harvested".
At the speculative house, Livermore copied stock prices from the automatic transmitter on a blackboard every day for gamblers to see. He was fascinated by these daily figures, and he wrote them down in a small notebook and analyzed them every day. He has a strong memory and is naturally sensitive to numbers, and through the recording and analysis of the historical movements of each stock, he found that the numbers on the quotation are regular. Behind the stock price are people gambling, because of human nature, people always repeat their actions and reflect them in the quotation. After a while, Livermore was able to guess the future rise and fall of the stock price based on the number of quotations alone. He gambled and found that the income from speculation was much higher than his daily work, so he decisively gave up his job and began to "speculate in stocks" full-time, when he was not really speculating in stocks. The following year, at the age of 15, he earned $1,000, the equivalent of $25,000 today.
But what greeted him behind him was not the endless banknotes, but the blockade of major speculators. Before the age of 20, Livermore had already made $10,000 from a speculative bank. But after a long time, the speculators were afraid of losing money, so they added Livermore to the blacklist and stopped doing his business. Livermore was cut off from his money, so he had to go to Wall Street, the place of stock market carnival, and go to a regular stock house to conduct real stock trading. But just a few days after he arrived, he went bankrupt.
More than 100 years ago, Wall Street was full of horse manure, and communication at that time should be regarded as the 0G era, and only telegrams could be sent. The price of the stock is sent to all parts of the country by manual telegraph, and there is a serious time delay. The stock price is 100 yuan, and when you buy it, the price has become 105 yuan, and the cost has increased significantly. He quickly lost all his principal.
Livermore went to speculative houses in other cities to rebuild his principal and return to Wall Street again. This time, he took into account the problem of delaying the quotation, which coincided with the bull market and quickly earned $50,000. Just when he thought he could choke the neck of the stock market from now on, only two days later, the market grabbed Livermore's hair fiercely, and he lost all his money again.
At that time, Livermore judged that the bull market had peaked, and he was eager to make a lot of money, forgetting his own trading rhythm, and he used all his money to short the stock. As a result, the stock plummeted, and the quotation could not keep up with the speed of the stock price decline, and when the order was placed at more than 100, the transaction price became 80. He was too bearish and started to go long with his backhand. The direction judgment was correct again, but the result was that the quotation was delayed, and the transaction price was 15 yuan. After all this back and forth, Livermore soon lost all his money.
Through these two bankruptcies, Livermore did not complain about the problems of the market, but made a deep reflection and review: if he can stick to his principles and understand more about the rules of the market, he will not go bankrupt.
And by improving their investment strategies, they can adapt to the rules of the game in the market.
Here's a little research.
I often have friends ask me if I have any recommended stocks recently. I don't usually recommend specific stocks. They want to make money investing in the stock market, but they don't bother to think about it, they just want to know which stock makes money. In fact, this Xi is very bad. Because the market is ever-changing, any investment must have its matching investment logic. Whether it is a technology stream or a value stream, there is no one who is good or bad, it is important to choose a more suitable one according to one's personality, cognition, etc.
Livermore is a master of following market trends. He can even artificially create trends.
At that time, there was a stock called Imperial Steel Company in the U.S. market, and its liquidity was very average after it was listed, and the company was very distressed, and a senior executive came to Livermore, hoping that he could make a market and raise the price. This is called market manipulation now, and it was not illegal at the time. Livermore's careful research determined that the company was truly undervalued.
So, he decided to get in on the hype. He put forward two requirements: first, 70% of the shares of the company that you control yourself should be locked up in a trust fund to prevent those major shareholders from selling at high prices. Second, he didn't want cash compensation, but asked the other party to give him a call option of 100,000 shares, and the exercise price was around $70. The meaning of a call option is that no matter how much the stock price rises now, you can buy the stock at the price agreed upon, that is, if the stock rises to $100, Livermore can buy it at $70 and sell it immediately at $100.
Let's take a look at how the speculative master operates.
First, he started to open a position at $70, but instead of opening it all at once, he increased it little by little, until he bought all the outstanding shares on the market. That is, to eat all the selling orders. Naturally, the stock price of the Imperial Steel Company began to rise steadily, and then the stockbrokers could not sit still, and a large amount of buying demand appeared.
After the price rose, Livermore sold some of his shares in Imperial Steel, cashing out a small amount of money first. Then he bought the stock again in the market at a higher price. There are many investors who have just received the stock and can't resist the temptation and sell it to him at a higher price.
This process was repeated several times in the market, and the upward trend of Imperial Steel's stock price was thus established. The market's belief is also starting to take shape. When the stock price reached $85, Livermore decisively made a fortune on his option exercise.
Many shareholders will think that there must be a dealer who controls the market, and they hold a huge amount of capital. The fact is that any stock market in the world is a huge reservoir of wealth, and except for a very few small-cap stocks that can be manipulated, no institution or individual can influence the bulls and bears of the entire market.
The formation of the stock price is actually generated after the game between the buyer and the seller, and the buyer and seller have more funds and stronger power, and the stock price will go to that side. It's like flowing water, moving with the trend.
Livermore is a master of trending, and his trick is to find that stock prices, like water, always move in the direction of least resistance. For example, if a stock has been falling for a long time, it is already very cheap, and the external environment is also in a good situation, at this time, the people who should sell have been sold out, and the remaining people are no longer willing to sell. Even with the bad news, the stock price didn't fall much. But as soon as there is good news, there are large purchases, and the stock price will rise significantly, in which case, the least resistance direction of the stock is to rise.
After judging the direction through the principle of least resistance, it is necessary to decisively take advantage of the trend, the bull market is brainless long, and the bear market is ruthlessly short.
Livermore's two life highlights were achieved through ruthless shorting of the stock market. Kill one person in ten steps, and don't stay for a thousand miles.
In 1906, the year before the Federal Reserve was founded. The U.S. stock market is unusually hot. Livermore found that the economic environment was not generally bad this year, with real estate and other assets depreciating, military spending was severe, and the earthquake and fires in San Francisco affected everyone. The railroad was destroyed by the earthquake and traffic was paralyzed.
In this situation, there is only one thing to do, ruthlessly short.
Do you know what the deadliest thing in life is?
Livermore has his eye on the Pacific Union Railroad and is aggressively shorting. But he was one step ahead of the market, and the Pacific Union stock rally continued to rise, and Livermore was mercilessly slapped to death in the rising wave.
Half a step ahead is a pioneer, and one step ahead is a martyr.
The following year, the penniless Livermore waited for the signal of a market crash, and he relied on the money he borrowed from the securities company to continue to short-sell ruthlessly, and finally earned his first $1 million. Since then, he has been famous on Wall Street for 30 years. In 1907, the stock market was bleeding, and the U.S. government and JP Morgan began to inject liquidity into the market. Many people hated Livermore, and Morgan thought that young people didn't speak martial arts, but he still put down his body and asked him to raise his noble hand.
In October of the same year, Livermore closed the empty position, and wanted to start a life of yachting at sea, champagne beauties, and no shame. But the following year, he heeded his friend's advice and, against his instincts, lost all the million he had earned in the cotton futures market. Just because he thinks his friend is an expert in the cotton industry.
Livermore is like an unkillable little strongman, he borrowed again, and through a series of maneuvers, he earned his wealth again and paid off his debts.
The air in 1929 gave Livermore a taste of 1907, the year he made a million dollars. There are no experts around him at this time, only himself, and he trusts his instincts. Started doing U.S. stocks. 52 Livermore hid alone on the top floor of the Fifth Avenue Crown Building, the most luxurious office building in New York, like a conductor of an orchestra, using the telephone to direct more than 50 brokerages to place orders for him, playing a grand and tragic hymn. This time he made $100 million. In the same year, the U.S. government earned only $42. This is the greatest trader he has ever been in the industry, but it is his swan song.
Five years later, Livermore went bankrupt again. At this time, the U.S. securities market began to formalize, and market manipulation that Xi was strictly prohibited. Livermore's lifelong skills have been challenged like never before, and he suffers from depression after years of debauchery in his private life and infidelity and twists in his marriage. It's hard to control your emotions, and emotions are the enemy of trading. At the age of 63, Livermore shot himself. The king of speculation has fallen.
Livermore's suicide was more than just the shattering of his personal myth. At the same time, it is also the end of an era. The unregulated and laissez-faire US stock market, under the lessons of several bloody lessons, began to move towards strict supervision, regularization, and specialization. As a once-in-a-century trading genius, Livermore's ending teaches us that any success is ultimately the success of the times.
Today's China A-share market is also in the process of continuous reform and improvement. Deep in the capital market, we all want to get a piece of China's economic development. For investment in the A-share market, I personally don't really advocate short-term technical schools like Livermore. It is suitable for a small number of people. It is an ironclad fact that the stock market loses, draws and earns, and the bull market is no exception. Because you can't afford it, you can't put it down, and you end up losing to Volatility. No matter how familiar you are with Livermore's biography, most people can't beat the greed and fear of human nature. Normal people have greed and fear, and if you want to win, you have to become abnormal first. Who is a normal person who speculates in stocks, and can a stock speculator be called a normal person? Just kidding, the only advantage you have is time. Embrace time and slowly become rich.