Reminiscences of a Stock Market Operator

作者:Victor Niederhoffer
日期:2010/10/13

In one of only useful parts of the original Reminiscences of a Stock Market Operator Livermore describes a con based on his intuitive grasp of something that could have been counted, and is of modern day resonance and suggestiveness. The set up is as follows.

1. Stocks up from the previous weekend's close.

2. A bank announcement– in this case surplus reserves of banks were supposed to decrease.

3. A decrease in surplus reserves, whatever they were, is supposed to be bearish.

4. Stocks that had gone up the most during the week would have "the usual reaction in the last half hour of trading." These of course would be the very stocks that the bucket shop had been most active in.

5. Because Livermore was so good, and the bucket shop took the other side of every one of their customers trades for an eighth, they wouldn't mind if he shorted those stocks since the bucket shop would already be short those stocks and now by taking the opposite side of his position they would be reducing their short. Livermore was so good that he had to hide the fact that indeed he was trading at all.

6.The bucket shop would be happy as there was nothing better than "catching the suckers both ways and nothing so easy with one point margins." After some more conning of the broker pretending that Livermore was just a rural rube hoping to have a few dollars left to lose on the track.

The outcome was stocks went down in the last half hours as Livermore figured. "The traders hammered the stocks in which they figures they would uncover the most stops, and sure enough prices slid just as I figured. I closed out my trades just before the rally in the last 5 minutes on the usual traders covering." There are many parts to this big con that are reminiscent of many things we face today.

What similar situations and predictive inferences might be drawn from this big con with its counting juxtaposition?