BOOK
"A man has to guard against many things," declared Jesse Livermore, "but most of all against himself." A revolutionary new communications technology had made it easy for Livermore to trade stocks instantly - so easy that his own foibles were greater obstacles than any financial rules or regulations. Fear and greed had become his twin mortal enemies.
Another hair-trigger trader just a few Net losses from a murderous rampage? Far from it, though Livermore ultimately proved to be deadly serious about investing: The technology that so altered his trading life was the telegraph. As Gregory J. Millman chronicles in The Day Traders, intraday stock speculation dates back at least to the 19th century, when Morse's wires began delivering price quotes to Wichita as quickly as to Wall Street. Unregulated stock-trading "bucket shops" opened nationwide, enabling people like Livermore, a Massachusetts farm boy, to get rich in what had been a game reserved mainly for New York's wealthy. His superanalytical methods made him $3 million in one day of the 1907 panic alone: He shorted everything in sight just before the bottom dropped out. Of course, the market can be a harsh mistress in the long term: Livermore's own great depression came in 1940, when he shot himself in the lobby of the Sherry-Netherland hotel.
Then as now - and violent outbursts aside - daytrading's great occupational hazard is myopia. When you're obsessed with the next 60 seconds, the long view hardly seems relevant, let alone worth reading an entire book about. But a good trader has to be able to feel the market like a sailor feels the water, so understanding as much about the total environment - the market's structure, history, rules, and heroes - is core knowledge that Millman ably imparts.
Buzzword-addled subtitle (The Untold Story of the Extreme Investors and How They Changed Wall Street Forever) notwithstanding, Millman's book nicely illuminates some of daytrading's less hyped but more significant aspects. If The Day Traders has a central lesson, it's the same gospel Livermore preached all his life: Traders must exercise strict and total discipline if they are to stand a chance.
Less interesting is the month Millman spent in a daytrading classroom, with its predictably Gilligan's Island assortment of newbie traders and parade of big-C Characters for teachers. Less time on the training floor and more time on the trading floor would have helped the book considerably. And Millman's tacked-on trading primer is no better than many of the other recently published how-tos.
The Day Traders: The Untold Story of the Extreme Investors and How They Changed Wall Street Forever, by Gregory J. Millman: $25. Times Books: (800) 726 0600, www.randomhouse.com.
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