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"I am tired," he said, "of hearing the public and the papers blame Wall Street for parting fools from their money. Take the biggest losers. They are not the piker suckers, who only lose what they risk-pennies. It's the successful business man, the shrewd merchant, who is the biggest sucker of the lot. He has made a fortune in his own line? How? By being on the job for years; by learning all there was to know about it; by taking reasonable chances; by utilizing his knowledge and experience to anticipate probabilities. He wants to increase that fortune at a faster rate and with less effort. He decides to make his money work for him - at high wages. He assures himself that as he is taking the risk of losing every cent he puts up it is only fair to make more than his usual profit. Why, that man doesn't lose his money in Wall Street. He loses it in his own office. It isn't the game that beats him; he beats himself. Am I right?"
- page 11, Reminiscences of a Stock Operator - |
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Great book. One of the best books on trading in my opinion.
I interpret this to mean something I was talking about in another thread:
Those that make it in this game do something very fundamental, yet easily missed by most; they survive. They survive long enough to learn how to win at the game. The trader that does not beat himself, has a greater chance of being around to beat the game.
One way of not to beat yourself, cut your losses and let your profits run. It's old, it's cliche. But it was good enough Livermore.
By staying in the game, one is learning all there was to know about it, learning to take reasonable chances, and learning to utilize his knowledge and experience to anticipate probabilities.
This survival rate can not be large. Especially if you consider that from birth we are programmed not to be traders. That is , many elements in trading are counter to things we are taught in life.
For example, in some schools a grade of 92% is an -A. That's 92 correct answers out of 100. An F could be for 60% or below. Trading is the opposite, if you are correct 40% of the time, you're doing better than most. But this is a percentage that is equated with failure in school.