This book treats stock trading as an adventure, but it is also a good introduction to the mentality of stock trading.

This autobiography is set in the first half of the twentieth century and stars Jesse Livermore, who was a natural speculator.  Jesse Livermore was very much larger than life, even though that is a metaphor that is far too overused generally.  He was one of the most influential speculators of the early twentieth century who won and lost fortunes, and often did this on the margin.

Livermore just knew when a market would turn and won his fortune on backing these hunches.  He lost his fortune when he did not back these hunches.  One of his most famous moves was shorting shares in the company that operated many of California’s railroads – just before the San Francisco earthquake.

The book also offers an insight into the way that some of the less scrupulous “bucket shops” would operate.  These were pure gambling operations that tried to look like stockbrokers.  Their trick was to trade on an incredible margin (sometimes as little as 1%) and then call in the margin – or liquidate the position without giving any money back – when the stock dipped under 1%.  No money ever went on to the stock market.  They would also withhold ticker prices from the punters in the shop so that they would be able to deny winning bets.

Livermore could still make enough money off them that he was banned from their premises – which forced him on to the stock market.

There are plenty of lessons in how to follow your hunches with stock trading here and it is written in a very readable format.  This book can be downloaded for free as well as bought off Amazon.