Only the Right Side | Jesse Livermore

» It takes a man a long time to learn all the lessons of his mistakes. 

They say there are two sides to everything.
But there is only one side to the stock market; and it is not the bull side or bear side but the right side.
It took me longer to get that principle fixed firmly in my mind 

than it did most of the more technical phases of the game of stock speculation.

 

 I have heard of people who amuse themselves conducting imaginary operations in the
stock market to prove with imaginary dollars how right they are. 

Sometimes these ghost gamblers make millions. 

It is very easy to be a plunger that way.

 

It is like the old story of the man who was going to fight a duel the next day.

His second asked him, "Are you a good shot?"
"Well," said the duelist, "I can snap the stem of a wineglass at twenty paces," and he looked modest.
"That's all very well," said the unimpressed second. 

"But can you snap the stem of the wineglass while the wineglass is pointing a loaded pistol straight at your heart?" «

Jesse Livermore

Quoted from:
Edwin Lefèvre (1923) - Reminiscences of a Stock Operator.

The Zurich Axioms | Max Gunther

Max Gunther (1985) - The fact is, nobody has the faintest idea of what is going to happen next year, next week, or even tomorrow. If you hope to get anywhere as a speculator, you must get out of the habit of listening to forecasts. It is of the utmost importance that you never take economists, market advisers, or other financial oracles seriously. 

 

[...] It is unlikely that God's plan for the universe includes making you rich. [...] To make any kind of gain in life – a gain of wealth, personal stature, whatever you define as 'gain' – you must place some of your material and/or emotional capital at risk. You must make a commitment of money, time, love, something. That is the law of the universe. [...] Of course, risk is a two-way street. But look at it this way. As an ordinary tax-hounded, inflation-raddled income earner, carrying much of the rest of the world on your back, you are in pretty sorry financial state anyhow.

 

[...] Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough. [...] Always take your profit too soon. Amateurs on Wall Street do it. Amateurs in poker games do it. Amateurs everywhere do it. They stay too long and lose. [...] If you can conquer greed, that one act of self-control will make you a better speculator than 99 percent of other men and women who are scrambling after wealth. 

 

Quotes from:

 Max Gunther (1985) - The Zurich Axioms: The Rules of Risk and Reward used by Generations of Swiss Bankers

On Randomness, Uncertainty, and Probability | Nassim Nicholas Taleb

Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance. When things go our way we reject the lack of certainty. The epiphany I had in my career in randomness came when I understood that I was not intelligent enough, nor strong enough, to even try to fight my emotions. Although Soros did not deliver anything meaningful in his writings, he knew how to handle randomness. My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it. 

 

A mistake is not something to be determined after the fact, but in light of the information available until that point. No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.Mild success can be explainable by skills and labor. Wild success is attributable to variance. Bullish or bearish are terms used by people who do not engage in practicing uncertainty, like the television commentators, or those who have no experience in handling risk. Alas, investors and businesses are not paid in probabilities; they are paid in dollars. Accordingly, it is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration.

We do not need to be rational and scientific when it comes to the details of our daily life—only in those that can harm us and threaten our survival. Modern life seems to invite us to do the exact opposite; become extremely realistic and intellectual when it comes to such matters as religion and personal behavior, yet as irrational as possible when it comes to matters ruled by randomness (say, portfolio or real estate investments). I have encountered colleagues, "rational," no-nonsense people, who do not understand why I cherish the poetry of Baudelaire and Saint-John Perse or obscure (and often impenetrable) writers like Elias Canetti, J. L. Borges, or Walter Benjamin. Yet they get sucked into listening to the "analyses" of a television "guru," or into buying the stock of a company they know absolutely nothing about, based on tips by neighbors who drive expensive cars." 

Quoted from:
Nassim Nicholas Taleb (2001) - Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets