The Real Star of Reminiscences Wasn’t Jesse Livermore

Corona Del Mar, CA

Howdy Friend!

The real star of Reminiscences of a Stock Operator wasn’t Jesse Livermore.

I know that’s not how most people read the book. Livermore gets the spotlight. He gets the legend. He gets the dramatic Wall Street myth wrapped around him like pimp wears a fur coat.

But as a trader?

He was a walking margin call.

Livermore blew up several times, borrowed money from nearly everyone he knew, traded with outrageous leverage, and eventually shot himself in the head after another wipeout. So when people hold him up as some kind of trading role model, I think they’re learning the wrong lesson from the book.

The real star was Old Turkey.

Whenever the young guns tried to get clever, call the turns, jump in and out, and prove they were smarter than the market, Old Turkey would just lean back and say:

“Well, it’s a bull market, you know.”

That was his whole point.

When the trend is moving, you don’t need to guess the exact top. You don’t need to prove how brilliant you are by calling the end before everyone else. You ride the trend until the evidence says the move is over.

Because nobody is smart enough to know exactly when the music is going to stop.

That brings me to SanDisk.

Our Mega Cap Trader strategy got into SanDisk back in April, and since then the stock has climbed more than 160%.

A lot of people started calling the top over a month ago.

And what happened?

It kept going.

Sure, there were dips along the way. That always happens. Stocks don’t climb in a straight line unless you’re looking at a fake chart in a brokerage commercial. But the trend stayed intact, and the strategy kept riding it.

That is why Mega Cap Trader is such a universal stock strategy. It combines trend following with mean reversion instead of pretending that every stock should be traded the same way at every moment.

And here’s the part that flips a lot of old-school technical analysis on its head.

As I’ve been showing you, we sell when price moves into what most traders would call the Fibonacci zone, and we buy when it moves outside it. That is one of the clearest pieces of evidence I can give you that most technical analysis, when it hasn’t been tested by a computer, isn’t just unproven.

A lot of it is backwards.

That’s also why I’m so excited about what’s coming in Portfolio Boss 6.

We’re still beta testing it right now, but one of the big upgrades is that you’ll soon be able to simply type in a stock symbol instead of having to build a whole portfolio first.

Type the symbol in, run the strategy, and you’re off to the races. That's what I did with SanDisk. Just type in your favorite tickers to see if they're on a buy.

And that leads directly into Strategy Mill.

For the past couple of days, I’ve had Strategy Mill crawling through the S&P 500, discovering custom trading rules for each individual symbol.

That’s one helluva breakthrough.

Years ago, you could test one set of rules across hundreds of stocks. But now we can automatically build individual rules for individual symbols, then filter out the junk and keep the cream of the crop. Like a factory for building trading strategies.

Pretty soon, we’re going to open a beta test group where we can start running this process across a massive range of instruments, including ADRs, large caps, mid caps, small caps, high-beta stocks with wild volatility, and even dividend stocks for traders who want something with a little less turbulence.

And just as a quick parenthetical…

Dividend stocks are not “safe” if you’re a buy-and-hold investor who just sits there and takes the punch. Dividend stocks fell more than 50% during the 2008 crash, so anyone pretending they’re some magic safety blanket is selling fairy dust.

But for traders, lower-volatility dividend stocks can still be useful. They can give us a smoother field to work with, as long as we’re still using rules, exits, and evidence instead of hope.

Which brings us right back to Old Turkey.

Jesse Livermore is the cautionary tale. He went balls to the wall, used every bit of leverage he could get, borrowed from everyone until nobody would lend to him anymore, and eventually paid the ultimate price for it.

Old Turkey is the one worth studying.

He understood that in a bull market, you don’t need to be the genius who calls the top.

You need a method that keeps you in the trend while the trend is still alive.

No one is smart enough to consistently pick the top.

More from me soon,