REMINISCENCES OF A STOCK OPERATOR

by Edwin Lefèvre

stocks are never too high to buy or too low to sell. The price, per se, has nothing to do with establishing my line of least resistance.

You will find in actual practice that if you trade as I have indicated any important piece of news given out between the closing of one market and the opening of another is usually in harmony with the line of least resistance. The trend has been established before the news is published, and in bull markets bear items are ignored and bull news exaggerated, and vice versa.

It sounds very easy to say that all you have to do is to watch the tape, establish your resistance points and be ready to trade along the line of least resistance as soon as you have determined it.

in actual practice a man has to guard against many things, and most of all against himself that is, against human nature.

the man who is right always has two forces working in his favor basic conditions a...

In a bull market bear factors are ignored. That is human nature, and yet human beings p...

When a man makes his play in a commodity market he must not permit himself set opinions. He must have an open mind and flexibility. It is not wise to disregard the message of the tape, no matter what your opinion of crop conditions or of the probable demand may be.

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 direction.

A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations.

I merely learn the way prices are most probably going to move. I check up my own trading by additional tests, to determine the psychological moment. I do that by watching the way the price acts after I begin.

It would not be so difficult to make money if a trader always stuck to his speculative guns that is, waited for the line of least resistance to define itself and began buying only when the tape said up or selling only when it said down.

accumulate his line on the way up. Let him buy one-fifth of his full line. If that does not show him a profit he must not increase his holdings because he has obviously begun wrong; he is wrong temporarily and there is no profit in being wrong at any time. The same tape that said UP did not necessarily lie merely because it is now saying NOT YET.

if after buying the first ten or twenty thousand bales, it showed me a loss, out I'd go. I was wrong. It might be I was only temporarily wrong. But as I have said before it doesn't pay to start wrong in anything.

What I accomplished by sticking to my system was that I always had a line of cotton in every real movement. In the course of accumulating my full line I might chip out fifty or sixty thousand dollars in these feeling-out plays of mine. This looks like a very expensive testing, but it wasn't. After the real movement started, how long would it take me to make up the fifty thousand dollars I had dropped in order to make sure that I began to load up at exactly the right time? No time at all! It always pays a man to be right at the right time.

It is simple arithmetic to prove that it is a wise thing to have the big bet down only when you win, and when you lose to lose only a small exploratory bet, as it were.

It comes easy for you to practice what you preach, because the money you bet is the least of your cares.

He would buy one hundred shares of some active stock and when, or if, it went up I per cent he would buy another hundred. On another point's advance, another hundred shares; and so on. He used to say he wasn't playing the game to make money for others and therefore he would put in a stop-loss order one point below the price of his last purchase. When the price kept going tip he simply moved up his stop with it. On a I per cent reaction he was stopped out. He declared he did not see any sense in losing more than one point, whether it came out of his original margin or out of his paper profits.

In the stock market Pat wasn't after tips or playing to catch twenty-points-a-week advances, but sure money in sufficient quantity to provide him with a good living.

He did not stick to his own proved system. That's the trouble with most of them,"

speculation must be an unnatural sort of business, because I find that the average speculator has arrayed against him his own nature.

The weaknesses that all men are prone to are fatal to success in speculation usually those very weaknesses that make him likable to his fellows or that he himself particularly guards against in those other ventures of his where they are not ne...

The speculator's chief enemies are always boring from within. 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 ...

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 fro...

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 m...

He must fear that his loss may develop into a much bigger loss, and hope that his profi...

It is absolutely wrong to gamble in stocks the way the...

no man living can beat the stock market! A man may make money out of individual deals in cotton or grain, but no man can beat the cotton market or the grain market.

A man can't spend years at one thing and not acquire a habitual attitude towards it quite unlike that of the average beginner. The difference distinguishes the professional from the amateur.

It is the way a man looks at things that makes or loses money for him in the speculative markets. The public has the dilettante's point of view toward his own effort. The ego obtrudes itself unduly and the thinking therefore is not deep or exhaustive.

The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itsel...

A trader gets to play the game as the professional billiard player does that is, he looks far ahead instead of considering the particular shot before him. It ...

he did not play prejudices but conditions. At all events, he was a consummate trader.

A market may advance sharply or rise gradually and yet not possess the power to absorb more than a certain amount of selling.

That is one trouble about trading on a large scale. You cannot sneak out as you can when you pike along. You cannot always sell out when you wish or when you think it wise. You have to get out when you can; when you have a market that will absorb your entire line. Failure to grasp the opportunity to get out may cost you millions. You cannot hesitate. If you do you are lost.

A man must be on the lookout so alertly that when his chance sticks in its head at his door he must grab it.

He was a true speculator, a thinker with the vision of a dreamer and the courage of a fighting man an unusually wellinformed man, who knew both the theory and the practice of trading in cotton. He loved to hear and to express ideas and theories and abstractions, and at the same time there was mighty little about the practical side of the cotton market or the psychology of cotton traders that he did not know, for he had been trading for years and had made and lost vast sums.

"If I fool myself," I told him, "I alone suffer and I pay the bill at once. There are no drawnout payments or unexpected annoyances. I play a lone hand by choice and also because it is the wisest and cheapest way to trade. I get my pleasure out of matching my brains against the brains of other traders men whom I have never seen and never talked to and never advised to buy or sell and never expect to meet or know. When I make money I make it backing my own opinions. I don't sell them or capitalise them. If I made money in any other way I would imagine I had not earned it. Your proposition does not interest me because I am interested in the game only as I play it for myself and in my own way."

I am so accustomed to losing money that I never think first of that phase of my mistakes. It is always the play itself, the reason why. In the first place I wish to know my own limitations and habits of thought. Another reason is that I do not wish to make the same mistake a second time. A man can excuse his mistakes only by capitalising them to his subsequent profit.

You can never bank on there being but one remarkable salesman in the world or on complete immunization from the influence of personality.

We talked of many things, for he is a widely read man with an amazing grasp of many subjects and a remarkable gift for interesting generalization. The wisdom of his speech is impressive; and as for plausibility, he hasn't an equal.

man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.

It was the most asinine play of my career. Instead of standing or falling by my own observation and deductions I was merely playing another man's game.

I didn't accumulate my line in accordance with the promptings of experience. I wasn't trading right. Having listened, I was lost.

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. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.

For me of all men to violate all the laws that experience had taught me to observe in order to prosper was more than asinine.

To learn that a man can make foolish plays for no reason whatever was a valuable lesson. It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when plausibly expressed by a brilliant mind.

Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be.

If you know much about the average customer of the average commission house you will agree with me that the hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street. You will chip out all you have if you adhere to your determination.

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.