Reminiscences of a Stock Operator

by Edwin Lefèvre

the tape is your telescope. You can depend upon it seven out of ten cases.

Of course there is always a reason for fluctuations, 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.

Your business with the tape is now not tomorrow. The reason can wait. But you must act instantly or be left.

all she could see was that ten thousand dollars was a lot of money and all I could see was more margin.

Whenever there was an unexplained sharp drop which was followed by instant recovery, the newspapers in those days used to call it a bucket-shop drive.

What beat me was not having brains enough to stick to my own game that is, to play the market only when I was satisfied that precedents favored my 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.

The beauty of doing business with a crook is that he always forgives you for catchinghim, so long as you don't stop doing business with him.

If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going.

I was acquiring the confidence that comes to a man from a professionally dispassionate attitude toward his own method of providing bread and butter for himself.

It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!

stocks are never too high for you to begin buying or too low to begin selling.

Suppose a man's line is five hundred shares of stock. I say that he ought not to buy it all at once ; not if he is speculating. If he is merely gambling the only advice I have to give him is, don't!

The bear side doesn't appeal to me any more than the bull side, or vice versa. My one steadfast prejudice is against being wrong.

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.

the only thing to do when a man is wrong is to be right by ceasing to be wrong.

What happened shows you that I am right in never trading at limits. Suppose I had limited my selling price to 300? I'd never have got it off. No, sir! When you want to get out, get out.

Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities.

He was a man, J. P. Morgan was. They don't come much bigger.

It does not take a reasonably young and normal man very long to lose the habit of being poor. It requires a little longer to forget that he used to be rich.

The business of the trader in commodities is simply to get facts about the demand and the supply, present and prospective. He does not indulge in guesses about a dozen things as he does in stocks. It always appealed to me trading in commodities.

You watch the market that is, the course of prices as recorded by the tape with one object: to determine the direction that is, the price tendency.

prices, like everything else, move along the line of least resistance.

Such a man will, or ought to, know whether it is a bull or a bear market, and if he knows that he knows whether to buy or to sell.

The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or a fall in the price of whatever he may be speculating in.

the thing to determine is the speculative line of least resistance at the moment of trading; and what he should wait for is the moment when that line defines itself, because that is his signal to get busy.

The price will break through the old barrier or movement-limit and go on. As a rule, there is always a crowd of traders who are short at 120 because it looked so weak, or long at 130 because it looked so strong, and, when the market goes against them they are forced, after a while, either to change their minds and turn or to close out, In either event they help to define even more clearly the price line of least resistance.

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.

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.

in bull markets bear items are ignored and bull news exaggera...

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 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.

"If you are sure you wish to make money in wheat just you watch it. Wait. The moment it crosses $1.20 buy it and you will get a nice quick play in it!" "Why not buy it now, at $1.14?" one of the party asked. "Because I don't know yet that it is going up at all."

He should 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.

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.

How many points is optimal would be an interesting modelling exercise

The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear.

Once I accepted his facts it was a cinch that my own conclusions, derived from his facts, would agree with his own.

Of all speculative blunders there are few greater than trying to average a losing game.

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.

the hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street.

A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses.

Never try to sell at the top. It isn't wise. Sell after a reaction if there is no rally.

in a bear market it is always wise to cover if complete demoralisation suddenly develops.

What playwrights call battles of business are not fights between human beings. They are merely tests of business vision.

Sometimes I do not see the facts all the facts clearly enough or early enough; or else I do not reason logically. Whenever any of these things happen I lose. I am wrong. And it always costs me money to be wrong.

The punishment for being wrong is to lose money. The reward for being right is to make money.

I will tell you my secret if you wish. It is this : I never buy at the bottom and I always sell too soon."

They were able men and shrewd traders. Altogether it was a dangerous combination to go up against. But facts are facts and the strongest of all allies are conditions.

the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this sordid earth.