Reminiscences of a Stock Operator (1923)

Honestly, nothing's changed. It's more modern; but otherwise all the same.

legal bucket shops is exactly what they are

a market maker (MM) (citadel, optiver) etc makes money in the most part by filtering a trade from customer, and then agreeing or disagreeing with its sentiment. If you buy say msft at $480 and they think it will dip below $480 they will 'hold risk' and wait for it to dip to say $470 then execute your trade, making $10

except instead of aiming to make 2% on a single trade, they aim to make maybe 5 cents this way on a $480 stock, mostly holding for less than a few seconds, on millions of trades an hour

thus, robinhood very valuable because it encouraged retail investors to have high trading volume on complex instruments. that "order flow" then sold to MM like above for fixed rates or % shares.

MM are ultimately a good thing because they provide liquidity. there is always a person willing to take the other side of a trade when you click. if you trade in a boondocks stock market like singapore or new zealand you will quickly see the market run dry and you cant get out of a position

There are still bucket shops, but they call them "binary options" now. If your broker only makes money when you lose money, they're not a broker, they're a casino.

There are many modern day bucket shops. Any CFD or "spread betting" product is just your broker taking the other side of your trade (and optionally, offsetting the risk). Prop firm "evaluations" or "accounts" are another popular one on social media.

Basically anything that amounts to a side-bet rather than a trade recorded on an exchange should (IMO) be avoided, and you're putting yourself in a situation where you and your broker have an adversarial relationship.

Died by his own hand, I would add.

One takeaway from the book is that trend following strategies are really difficult to follow. Jesse Livermore had a 3 yearlong losing streak from 2011 - 2014 despite him following his rules. After the events of the book, he went short in 1929 and was reportedly worth over 100m in that time, a huge amount. Then he lost it all in the strongly mean reverting markets of the 1930s where his trend following strategy didn't work.

He was a problem gambler, but I think if we looked at top poker players of today, they'd all have some love the gamble in them. Jesse had godly tape reading skills that allowed him to beat the bucket shops at the start of his career.

After being kicked out of the bucket shops, he should have just become a floor trader and in all likelihood, he'd have had lower highs but would have fared a lot better overall. A lot of the trading cliches like cutting trading losses quickly, letting profits run, averaging up rather than down originate from this book. There is a reason people still talk about it 100 years after its publication. It's a good contender for the best trading book of all time.

At my first job in finance I worked at a trading firm that recruited people off the street to electronically click trade futures. They would ride the intraday market moves and constantly open/close positions. At the end of the day they would be flat. It was a lot like gambling, but with CNBC on the TV instead of sports.

It’s kind of funny to see the similarities in this book. Like the bucket shops, there was a simulation environment with live market data where trainees had to prove themselves before they can move onto live trading. It turned out that a lot of folks were pretty good at the fake/simulation training but failed miserably with live trading due to their orders actually influencing the market. The firm only lasted a few years.