Lefevre, Edwin. Reminiscences of a Stock Operator. 1923.
Of course there is always a reason for fluctuations [in the tape], but the tape does not concern itself with the why and wherefore. It doesn't go into explanations. I didn't ask the tape why when I was fourteen, and I don't ask it to-day, at forty. The reason for what a certain stock does to-day may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now - not to-morrow. The reason can wait. But you must act instantly or be left.
I knew something was wrong somewhere, but I couldn't spot it exactly. But if something was coming and I didn't know where from, I couldn't be on my guard against it. That being the case I'd better be out of the market.
There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily - or sufficient knowledge to make his play an intelligent play.
The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.
A stock operator has to fight a lot of expensive enemies within himself.
I never argue with the tape. Getting sore at the market doesn't get you anywhere.
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 the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.
The beauty of doing business with a crook is that he always forgives you for catching him, so long as you don't stop doing business with him.
There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win.
But not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish.
It never was my thinking that made the big money for me. It always was my sitting.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn.
One of the most helpful things that anybody can learn is to give up trying to catch the last eighth - or the first. These two are the most expensive eighths in the world.
From then on I began to think of basic conditions instead of individual stocks. I promoted myself to a higher grade in the hard school of speculation. It was a long and difficult step to take.
I never hesitate to tel la man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don't mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn't wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn't even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.
When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down. I buy on a scale up.
Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch.
Whan I am long of stocks it is because my reading of conditions has made me bullish. But you find many people, reputed to be intelligent, who are bullish because they have stocks. I do not allow my possessions - or my prepossessions either - to do any thinking for me. That is why I repeat that I never argue with the tape.
... since the entire list moves in accordance with the main current there was not so much need as I had imagined to study individual plays or the behavior of this or the other stock.
Obviously the thing to do was to be bullish in a bull market and bearish in a bear market.
The analysis of the week that had passed was less important to me than the forecast of the weeks that were to come.
But the first time I traded because of a crisis that was still to come I found that I had been using a telescope. ... I saw, and knew that I saw. Thinking about the reward for my excellent sight kept me from considering the distance to the dollar-heap. I should have walked and not sprinted.
That is how I came to learn that even when one is properly bearish at the very beginning of a bear market it is well not to begin selling in bulk until there is no danger of the engine back-firing.
If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his mistakes he wouldn't own a blessed thing.
He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.
For purposes of easy explanation we will say that prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.
In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be - up or down. The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either directions.
It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day - and you lose more than you should had you not listened to hope - to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out - too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope.
Of all speculative blunders there are few greater than trying to average a losing game. ... Always sell what shows you a loss and keep what shows you a profit.
In fact, of all hoodoos in Wall Street I think the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent.
I can pay the money back with money, but the favours and kindnesses I must pay back in kind - and you are apt to find these moral obligations mighty high priced at times. Moreover there is no statute of limitations.
... a market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break.
It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer.
In a bear market it is always wise to cover if complete demoralisation suddenly develops.
When people speak about raids the inference is that the raids are unjustified; almost criminal. But selling a stock down to a price much below what it is worth is mighty dangerous business. It is well to bear in mind that a raided stock that fails to rally is not getting much inside buying and where there is a raid - that is, unjustified short selling - there is usually apt to be inside buying.
A man may know what to do and lose money - if he doesn't do it quickly enough.
He cannot bet on the unreasonable or on the unexpected, however strong his personal convictions may be about man's unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities - that is, try to anticipate them.
Experiences had taught me to beware of buying a stock that refuses to follow the group-leader.