Chapter 5

The average ticker hound—or, as they used to call him, tape-worm—goes wrong, I suspect, as much from over-specialization as from anything else. It means a highly expensive inelasticity. After all, the game of speculation isn’t all mathematics or set rules, however rigid the main laws may be. Even in my tape reading something enters that is more than mere arithmetic. There is what I call the behavior of a stock, actions that enable you to judge whether or not it is going to proceed in accordance with the precedents that your observation has noted. 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. No diagnosis, no prognosis. No prognosis, no profit.

I suspect the average ticker hound, once called a tape-worm, goes wrong as much from overspecializing as from anything else. That means a costly inability to adapt. After all, speculation is not just math or fixed rules, however rigid its main laws may be. Even when I read the tape, there is more to it than arithmetic. There is what I call a stock’s behavior. Its actions help you judge whether it will follow the patterns you have observed before. If a stock doesn’t act right, don’t touch it. Because you can’t tell exactly what is wrong, you can’t tell which way the stock is going. No diagnosis, no forecast. No forecast, no profit.

It is a very old thing, this of noting the behavior of a stock and studying its past performances. When I first came to New York there was a broker’s office where a Frenchman used to talk about his chart. At first I thought he was a sort of pet freak kept by the firm because they were good-natured. Then I learned that he was a persuasive and most impressive talker. He said that the only thing that didn’t lie because it simply couldn’t was mathematics. By means of his curves he could forecast market movements. Also he could analyse them, and tell, for instance, why Keene did the right thing in his famous Atchison preferred bull manipulation, and later why he went wrong in his Southern Pacific pool. At various times one or another of the professional traders tried the Frenchman’s system—and then went back to their old unscientific methods of making a living. Their hit-or-miss system was cheaper, they said. I heard that the Frenchman said Keene admitted that the chart was 100 per cent right but claimed that the method was too slow for practical use in an active market.

Watching how a stock behaves and studying its past performance is nothing new. When I first came to New York, a Frenchman used to talk about his chart at a broker’s office. At first, I thought he was a sort of pet oddity the firm kept around out of kindness. Then I learned that he was a persuasive and highly impressive speaker. He said mathematics was the only thing that never lied, because it simply couldn’t. He could use his curves to predict market movements. He could also analyze those movements. For example, he could explain why Keene did the right thing in his famous Atchison preferred bull manipulation. Later, he could explain why Keene went wrong in his Southern Pacific pool. At various times, one professional trader or another tried the Frenchman’s system. Then each went back to the old, unscientific methods of making a living. Their hit-or-miss system was cheaper, they said. I heard that the Frenchman said Keene admitted the chart was 100 percent right. But Keene claimed the method was too slow for practical use in an active market.

Then there was one office where a chart of the daily movement of prices was kept. It showed at a glance just what each stock had done for months. By comparing individual curves with the general market curve and keeping in mind certain rules the customers could tell whether the stock on which they got an unscientific tip to buy was fairly entitled to a rise. They used the chart as a sort of complementary tipster. To-day there are scores of commission houses where you find trading charts. They come ready-made from the offices of statistical experts and include not only stocks but commodities.

There was also an office that kept a chart of daily price movements. It showed at a glance what each stock had done over the past several months. Customers compared each stock’s curve with the overall market curve and kept certain rules in mind. This helped them judge whether a stock they had received an unscientific tip to buy was likely to rise. They used the chart as a kind of second tipster. Today, dozens of brokerage firms have trading charts. These come ready-made from statistical experts and cover commodities as well as stocks.

I should say that a chart helps those who can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke. There is an extremely able man, a former partner of a well-known Stock Exchange house, who is really a trained mathematician. He is a graduate of a famous technical school. He devised charts based upon a very careful and minute study of the behaviour of prices in many markets—stocks, bonds, grain, cotton, money, and so on. He went back years and years and traced the correlations and seasonal movements—oh, everything. He used his charts in his stock trading for years. What he really did was to take advantage of some highly intelligent averaging. They tell me he won regularly—until the World War knocked all precedents into a cocked hat. I heard that he and his large following lost millions before they desisted. 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. And all a man needs to know to make money is to appraise conditions.

I would say that a chart helps people who can read it, or rather, who can absorb what they read. The average chart reader, however, is likely to become obsessed with the idea that dips, peaks, and primary and secondary movements are all that matter in stock speculation. If he takes that belief to its logical limit, he is bound to go broke. There is an extremely capable man who was once a partner in a well-known Stock Exchange firm. He is a trained mathematician and a graduate of a famous technical school. He created charts based on a very careful, detailed study of price behavior in many markets: stocks, bonds, grain, cotton, money, and so on. He went back many years and traced the correlations and seasonal movements, oh, everything. He used his charts in stock trading for years. What he really did was take advantage of some highly intelligent averaging. I am told he won regularly until the World War overturned all precedent. I heard that he and his large following lost millions before they stopped. But not even a world war can prevent a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is how to assess conditions.

I didn’t mean to get off the track like that, but I can’t help it when I think of my first few years in Wall Street. I know now what I did not know then, and I think of the mistakes of my ignorance because those are the very mistakes that the average stock speculator makes year in and year out.

I didn’t mean to get sidetracked, but I can’t help it when I think about my first few years on Wall Street. I know now what I didn’t know then. I think about the mistakes I made out of ignorance because the average stock speculator makes those same mistakes year after year.

After I got back to New York to try for the third time to beat the market in a Stock Exchange house I traded quite actively. I didn’t expect to do as well as I did in the bucket shops, but I thought that after a while I would do much better because I would be able to swing a much heavier line. Yet, I can see now that my main trouble was my failure to grasp the vital difference between stock gambling and stock speculation. Still, by reason of my seven years’ experience in reading the tape and a certain natural aptitude for the game, my stake was earning not indeed a fortune but a very high rate of interest. I won and lost as before, but I was winning on balance. The more I made the more I spent. This is the usual experience with most men. No, not necessarily with easy-money pickers, but with every human being who is not a slave of the hoarding instinct. Some men, like old Russell Sage, have the money-making and the money-hoarding instinct equally well developed, and of course they die disgustingly rich.

After I returned to New York, I traded actively in a Stock Exchange firm. It was my third attempt to beat the market at such a firm. I didn’t expect to do as well as I had in the bucket shops. But I thought that, after a while, I would do much better because I could trade much larger amounts. Now I can see that my main problem was failing to understand the crucial difference between stock gambling and stock speculation. Still, I had seven years of experience reading the tape and a certain natural talent for the game. So my trading capital wasn’t earning me a fortune, but it was earning a very high return. I won and lost as before, but I came out ahead overall. The more I made, the more I spent. That is what usually happens with most men. No, not necessarily just with people who make easy money, but with every human being who isn’t a slave to the urge to hoard. Some men, like old Russell Sage, are equally driven to make money and hoard it. And, of course, they die disgustingly rich.

The game of beating the market exclusively interested me from ten to three every day, and after three, the game of living my life. Don’t misunderstand me. I never allowed pleasure to interfere with business. When I lost it was because I was wrong and not because I was suffering from dissipation or excesses. There never were any shattered nerves or rum-shaken limbs to spoil my game. I couldn’t afford anything that kept me from feeling physically and mentally fit. Even now I am usually in bed by ten. As a young man I never kept late hours, because I could not do business properly on insufficient sleep. I was doing better than breaking even and that is why I didn’t think there was any need to deprive myself of the good things of life. The market was always there to supply them. 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.

From ten to three every day, I was interested only in beating the market. After three, I was interested in living my life. Don’t misunderstand me. I never let pleasure interfere with business. When I lost, it was because I was wrong, not because I had been drinking or overindulging. I never had frayed nerves or limbs shaken by alcohol to spoil my game. I couldn’t afford anything that kept me from feeling physically and mentally fit. Even now, I’m usually in bed by ten. As a young man, I never stayed up late because I couldn’t do business properly without enough sleep. I was doing better than breaking even, so I saw no need to deny myself the good things in life. The market was always there to provide them. I was gaining the confidence that comes from taking a professional, unemotional approach to earning a living.

The first change I made in my play was in the matter of time. I couldn’t wait for the sure thing to come along and then take a point or two out of it as I could in the bucket shops. I had to start much earlier if I wanted to catch the move in Fullerton’s office. In other words, I had to study what was going to happen; to anticipate stock movements. That sounds asininely commonplace, but you know what I mean. It was the change in my own attitude toward the game that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.

The first thing I changed about my trading was my timing. In the bucket shops, I could wait for a sure thing and then take a point or two from it. I couldn't do that at Fullerton's office. If I wanted to catch a move there, I had to start much earlier. In other words, I had to study what was going to happen and anticipate stock movements. That sounds stupidly obvious, but you know what I mean. The change in my own attitude toward the game was what mattered most to me. Little by little, it taught me the essential difference between betting on fluctuations and anticipating inevitable rises and falls. It was the difference between gambling and speculating.

I had to go further back than an hour in my studies of the market—which was something I never would have learned to do in the biggest bucket shop in the world. I interested myself in trade reports and railroad earnings and financial and commercial statistics. Of course I loved to trade heavily and they called me the Boy Plunger; but I also liked to study the moves. I never thought that anything was irksome if it helped me to trade more intelligently. Before I can solve a problem I must state it to myself. When I think I have found the solution I must prove I am right. I know of only one way to prove it; and that is, with my own money.

I had to study more than just the past hour of market activity. I never would have learned to do that in the biggest bucket shop in the world. I took an interest in trade reports, railroad earnings, and financial and commercial statistics. Of course, I loved to trade heavily, and people called me the Boy Plunger. But I also liked to study market moves. I never found anything tedious if it helped me trade more intelligently. Before I can solve a problem, I have to state it to myself. When I think I have found the solution, I have to prove I am right. I know only one way to prove it: with my own money.

Slow as my progress seems now, I suppose I learned as fast as I possibly could, considering that I was making money on balance. If I had lost oftener perhaps it might have spurred me to more continuous study. I certainly would have had more mistakes to spot. But I am not sure of the exact value of losing, for if I had lost more I would have lacked the money to test out the improvements in my methods of trading.

My progress seems slow now, but I suppose I learned as fast as I could, given that I was making money overall. If I had lost more often, perhaps I would have been driven to study more consistently. I certainly would have had more mistakes to identify. But I am not sure exactly how valuable losing is. If I had lost more, I would not have had the money to test improvements to my trading methods.

Studying my winning plays in Fullerton’s office I discovered that although I often was 100 per cent right on the market—that is, in my diagnosis of conditions and general trend—I was not making as much money as my market “rightness” entitled me to. Why wasn’t I?

When I studied my winning trades at Fullerton’s office, I discovered something. I was often 100 percent right about the market. That is, I correctly judged market conditions and the overall trend. But I wasn’t making as much money as my market “rightness” should have earned me. Why wasn’t I?

There was as much to learn from partial victory as from defeat.

There was just as much to learn from a partial victory as from defeat.

For instance, I had been bullish from the very start of a bull market, and I had backed my opinion by buying stocks. An advance followed, as I had clearly foreseen. So far, all very well. But what else did I do? Why, I listened to the elder statesmen and curbed my youthful impetuousness. I made up my mind to be wise and play carefully, conservatively. Everybody knew that the way to do that was to take profits and buy back your stocks on reactions. And that is precisely what I did, or rather what I tried to do; for I often took profits and waited for a reaction that never came. And I saw my stock go kiting up ten points more and I sitting there with my four-point profit safe in my conservative pocket. They say you never grow poor taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market.

For example, I had been bullish from the very start of a bull market, and I had backed my opinion by buying stocks. Prices rose, just as I had clearly predicted. So far, so good. But what else did I do? I listened to the experienced veterans and reined in my youthful impulsiveness. I decided to be wise and trade carefully and conservatively. Everyone knew how to do that: take profits and buy back your stocks when prices dip. And that is exactly what I did, or rather, what I tried to do. I often took profits and waited for a dip that never came. Then I watched my stock shoot up another ten points while I sat there with my four-point profit safely tucked away. They say you never grow poor taking profits. No, you don’t. But you don’t grow rich taking a four-point profit in a bull market, either.

Where I should have made twenty thousand dollars I made two thousand. That was what my conservatism did for me. About the time I discovered what a small percentage of what I should have made I was getting I discovered something else, and that is that suckers differ among themselves according to the degree of experience.

I should have made twenty thousand dollars, but I made two thousand. That was what being cautious did for me. Around the time I realized how little I was making compared with what I should have made, I discovered something else. Suckers differ from one another in how much experience they have.

The tyro knows nothing, and everybody, including himself, knows it. But the next, or second, grade thinks he knows a great deal and makes others feel that way too. He is the experienced sucker, who has studied—not the market itself but a few remarks about the market made by a still higher grade of suckers. The second-grade sucker knows how to keep from losing his money in some of the ways that get the raw beginner. It is this semisucker rather than the 100 per cent article who is the real all-the-year-round support of the commission houses. He lasts about three and a half years on an average, as compared with a single season of from three to thirty weeks, which is the usual Wall Street life of a first offender. It is naturally the semisucker who is always quoting the famous trading aphorisms and the various rules of the game. He knows all the don’ts that ever fell from the oracular lips of the old stagers—excepting the principal one, which is: Don’t be a sucker!

The beginner knows nothing, and everyone, including the beginner, knows it. But the next grade thinks he knows a great deal. He makes others think so too. He is the experienced sucker. He has studied a few remarks about the market, not the market itself. Those remarks came from an even higher grade of suckers. The second-grade sucker knows how to avoid some of the ways a raw beginner loses money. This semisucker, rather than the complete sucker, is the real year-round support of the brokerage houses. He lasts about three and a half years on average. A first offender in Wall Street usually lasts a single season of three to thirty weeks. Naturally, the semisucker is always quoting famous trading sayings and the various rules of the game. He knows all the things the old hands solemnly warned traders not to do. He knows all of them except the main one: Don’t be a sucker!

This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines. He waits for them. He measures his bargains by the number of points it has sold off from the top. In big bull markets the plain unadulterated sucker, utterly ignorant of rules and precedents, buys blindly because he hopes blindly. He makes most of the money—until one of the healthy reactions takes it away from him at one fell swoop. But the Careful Mike sucker does what I did when I thought I was playing the game intelligently—according to the intelligence of others. I knew I needed to change my bucket-shop methods and I thought I was solving my problem with any change, particularly one that assayed high gold values according to the experienced traders among the customers.

This semisucker thinks he has gained wisdom because he loves to buy when prices fall. He waits for prices to fall. He judges his bargains by how many points the price has dropped from its peak. In big bull markets, the pure, unadulterated sucker knows nothing about rules or precedents. He buys blindly because he hopes blindly. He makes most of the money, until a healthy market correction takes it away in one blow. But the Careful Mike sucker does what I did when I thought I was trading intelligently, using other people’s intelligence. I knew I needed to change my bucket-shop methods, and I thought any change would solve my problem. I especially thought so if the experienced traders among the customers considered the change highly valuable.

Most—let us call ’em customers—are alike. You find very few who can truthfully say that Wall Street doesn’t owe them money. In Fullerton’s there were the usual crowd. All grades! Well, there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others. He did not seem very keen to get tips—that is, he never asked the talkers what they’d heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again—when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn’t donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.

Most people, let’s call them customers, are alike. Very few can honestly say that Wall Street doesn’t owe them money. Fullerton’s had the usual crowd. All types! But there was one old fellow who was different. For one thing, he was much older. He never offered advice or bragged about his winnings. He was a great listener and paid close attention to the others. He didn’t seem eager for tips. He never asked the talkers what they’d heard or knew. But whenever someone gave him a tip, he thanked them very politely. Sometimes he thanked them again if the tip turned out well. But if it went wrong, he never complained. So nobody could tell whether he had acted on the tip or ignored it. The story around the office was that the old fellow was rich and could take large positions. But he didn’t seem to be paying the firm much in commissions, at least as far as anyone could see. His name was Partridge, but behind his back they called him Turkey. He had a thick chest and liked to strut around the rooms with the point of his chin resting on his chest.

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap’s answer was always the same.

The customers all wanted someone to push them into action so they could blame others if things went wrong. They would go to old Partridge with a stock tip from a friend of a friend of an insider. They would tell him they hadn't acted on the tip, hoping he would tell them what to do. But whether the tip was to buy or sell, the old man's answer was always the same.

The customer would finish the tale of his perplexity and then ask: “What do you think I ought to do?”

The customer would finish explaining what was troubling him and then ask: “What do you think I should do?”

Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, “You know, it’s a bull market!”

Old Turkey would tilt his head and look at the other customer with a fatherly smile. Finally, he would say in a very impressive manner, “You know, it’s a bull market!”

Time and again I heard him say, “Well, this is a bull market, you know!” as though he were giving to you a priceless talisman wrapped up in a million-dollar accident-insurance policy. And of course I did not get his meaning.

I often heard him say, “Well, this is a bull market, you know!” He said it as if he were giving you a priceless charm wrapped in a million-dollar accident insurance policy. And of course, I did not understand what he meant.

One day a fellow named Elmer Harwood rushed into the office, wrote out an order and gave it to the clerk. Then he rushed over to where Mr. Partridge was listening politely to John Fanning’s story of the time he overheard Keene give an order to one of his brokers and all that John made was a measly three points on a hundred shares and of course the stock had to go up twenty-four points in three days right after John sold out. It was at least the fourth time that John had told him that tale of woe, but old Turkey was smiling as sympathetically as if it was the first time he heard it.

One day, a fellow named Elmer Harwood rushed into the office, wrote out an order, and handed it to the clerk. Then he hurried over to Mr. Partridge, who was politely listening to John Fanning tell a story. John had overheard Keene give an order to one of his brokers. All John made was a measly three points on a hundred shares. And of course, right after John sold out, the stock went up twenty-four points in three days. It was at least the fourth time John had told Mr. Partridge that tale of woe. But old Turkey was smiling as sympathetically as if he were hearing it for the first time.

Well, Elmer made for the old man and, without a word of apology to John Fanning, told Turkey, “Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I’ll be able to buy it back cheaper. So you’d better do likewise. That is, if you’ve still got yours.”

Well, Elmer went over to the old man and, without apologizing to John Fanning, told Turkey, “Mr. Partridge, I just sold my Climax Motors stock. My people say the market is due for a downturn and that I can buy the stock back cheaper. So you’d better do the same. That is, if you still have yours.”

Elmer looked suspiciously at the man to whom he had given the original tip to buy. The amateur, or gratuitous, tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out.

Elmer looked suspiciously at the man he had originally advised to buy. An amateur who gives tips for free always thinks he owns the person who receives the tip, body and soul. He thinks so even before he knows how the tip will turn out.

“Yes, Mr. Harwood, I still have it. Of course!” said Turkey gratefully. It was nice of Elmer to think of the old chap.

“Yes, Mr. Harwood, I still have it. Of course!” Turkey said gratefully. It was nice of Elmer to think of the old man.

“Well, now is the time to take your profit and get in again on the next dip,” said Elmer, as if he had just made out the deposit slip for the old man. Failing to perceive enthusiastic gratitude in the beneficiary’s face, Elmer went on: “I have just sold every share I owned!”

“Well, now is the time to take your profit and buy again on the next dip,” said Elmer. He spoke as if he had just filled out the old man’s deposit slip himself. When he saw no enthusiastic gratitude on the old man’s face, Elmer went on: “I’ve just sold every share I owned!”

From his voice and manner you would have conservatively estimated it at ten thousand shares.

From his voice and manner, you would have guessed it was at least ten thousand shares.

But Mr. Partridge shook his head regretfully and whined, “No! No! I can’t do that!”

But Mr. Partridge shook his head regretfully and whined, “No! No! I can’t do that!”

“What?” yelled Elmer.

“What?” yelled Elmer.

“I simply can’t!” said Mr. Partridge. He was in great trouble.

“I just can’t!” said Mr. Partridge. He was in great trouble.

“Didn’t I give you the tip to buy it?”

“Didn’t I tell you to buy it?”

“You did, Mr. Harwood, and I am very grateful to you. Indeed, I am, sir. But——”

“You did, Mr. Harwood, and I’m very grateful to you. I really am, sir. But…”

“Hold on! Let me talk! And didn’t that stock go up seven points in ten days? Didn’t it?”

“Wait! Let me talk! Didn’t that stock rise seven points in ten days? Didn’t it?”

“It did, and I am much obliged to you, my dear boy. But I couldn’t think of selling that stock.”

“It did, and thank you very much, my dear boy. But I couldn’t possibly sell that stock.”

“You couldn’t?” asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers.

“You couldn’t?” asked Elmer, beginning to look doubtful himself. Most people who give stock tips also tend to take them.

“No, I couldn’t.”

“No, I couldn’t.”

“Why not?” And Elmer drew nearer.

“Why not?” And Elmer moved closer.

“Why, this is a bull market!” The old fellow said it as though he had given a long and detailed explanation.

“Why, this is a bull market!” The old man said it as if he had given a long, detailed explanation.

“That’s all right,” said Elmer, looking angry because of his disappointment. “I know this is a bull market as well as you do. But you’d better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself.”

“That’s all right,” said Elmer, looking angry because he was disappointed. “I know this is a bull market as well as you do. But you’d better sell them your stock and buy it back when the price drops. You might as well lower your cost.”

“My dear boy,” said old Partridge, in great distress—“my dear boy, if I sold that stock now I’d lose my position; and then where would I be?”

“My dear boy,” said old Partridge, clearly distressed, “my dear boy, if I sold that stock now, I’d lose my position. Then where would I be?”

Elmer Harwood threw up his hands, shook his head and walked over to me to get sympathy: “Can you beat it?” he asked me in a stage whisper. “I ask you!”

Elmer Harwood threw up his hands and shook his head. He walked over to me for sympathy. “Can you believe it?” he asked in a loud whisper. “I ask you!”

I didn’t say anything. So he went on: “I give him a tip on Climax Motors. He buys five hundred shares. He’s got seven points’ profit and I advise him to get out and buy ’em back on the reaction that’s overdue even now. And what does he say when I tell him? He says that if he sells he’ll lose his job. What do you know about that?”

I didn’t say anything. So he went on: “I give him a tip on Climax Motors. He buys five hundred shares. He’s up seven points, and I advise him to sell. I tell him to buy the shares back when the price drops, which is already overdue. And what does he say when I tell him? He says that if he sells, he’ll lose his job. Can you believe that?”

“I beg your pardon, Mr. Harwood; I didn’t say I’d lose my job,” cut in old Turkey. “I said I’d lose my position. And when you are as old as I am and you’ve been through as many booms and panics as I have, you’ll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don’t feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It’s a bull market, you know.” And he strutted away, leaving Elmer dazed.

“Excuse me, Mr. Harwood. I didn’t say I’d lose my job,” old Turkey interrupted. “I said I’d lose my position in the market. And when you’re as old as I am and have lived through as many booms and panics, you’ll understand. Nobody can afford to lose their position, not even John D. Rockefeller. I hope the stock falls and you can buy back your shares at a much lower price, sir. But I can only trade according to what I’ve learned over many years. I paid a high price for that experience, and I don’t want to pay for the same lesson twice. Still, I’m as grateful to you as if I had the money in the bank. It’s a bull market, you know.” And he strutted away, leaving Elmer dazed.

What old Mr. Partridge said did not mean much to me until I began to think about my own numerous failures to make as much money as I ought to when I was so right on the general market. The more I studied the more I realized how wise that old chap was. He had evidently suffered from the same defect in his young days and knew his own human weaknesses. He would not lay himself open to a temptation that experience had taught him was hard to resist and had always proved expensive to him, as it was to me.

What old Mr. Partridge said did not mean much to me at first. Then I began thinking about my many failures to make as much money as I should have. That happened even when I was so right about the overall market. The more I thought about it, the more I realized how wise the old man was. He had evidently suffered from the same weakness when he was young and knew his own human weaknesses. Experience had taught him that the temptation was hard to resist and had always cost him money, just as it had cost me. So he would not expose himself to it.

I think it was a long step forward in my education when I realized at last that when old Mr. Partridge kept on telling the other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements—that is, not in reading the tape but in sizing up the entire market and its trend.

I think I took a big step forward in my education when I finally understood old Mr. Partridge. He kept telling the other customers, “Well, you know this is a bull market!” He really meant that the big money was made from the market’s major movements, not its individual fluctuations. It came from assessing the whole market and its trend, not from reading the tape.

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine—that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

Let me say one thing right here. I’ve spent many years on Wall Street and made and lost millions of dollars. And I want to tell you this: It was never my thinking that made me the big money. It was always my sitting. Got that? My sitting tight! It’s no trick to be right about the market. You always find plenty of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time. They started buying or selling stocks at precisely the prices that should have brought them the greatest profit. And their experience always matched mine. They made no real money from it. Men who can be right and also sit tight are rare. I found that one of the hardest things to learn. But only after a stock trader has fully grasped it can he make big money. It is literally true that millions come more easily to a trader who knows how to trade than hundreds did when he didn’t.

The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saving what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.

The reason is that a man may see things clearly but still grow impatient or doubtful when the market takes its time doing what he expected. That is why so many men on Wall Street lose money. They are not suckers at all, not even third-rate ones. The market does not beat them. They beat themselves because, though they have brains, they cannot sit tight. Old Turkey was absolutely right to do and say what he did. He had the courage of his convictions and the intelligent patience to sit tight.

Disregarding the big swing and trying to jump in and out was fatal to me. Nobody can catch all the fluctuations. In a bull market your game is to buy and hold until you believe that the bull market is near its end. To do this you must study the general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps! Wait until you see—or if you prefer, until you think you see—the turn of the market; the beginning of a reversal of general conditions. You have to use your brains and your vision to do this; otherwise my advice would be as idiotic as to tell you to buy cheap and sell dear. 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. They have cost stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

Ignoring the big market swing and trying to jump in and out was disastrous for me. Nobody can catch every price fluctuation. In a bull market, your game is to buy and hold until you believe the bull market is near its end. To do this, you must study general conditions, not tips or factors affecting individual stocks. Then sell all your stocks. Get out for good! Wait until you see the market turn, or, if you prefer, until you think you see it turn. That turn marks the beginning of a reversal in general conditions. You have to use your brains and your vision to recognize it. Otherwise, my advice would be as foolish as telling you to buy low and sell high. One of the most helpful things anyone can learn is to stop trying to catch the last eighth of a price move, or the first. These two are the most expensive eighths in the world. Together, they have cost stock traders enough millions of dollars to build a concrete highway across the continent.

Another thing I noticed in studying my plays in Fullerton’s office after I began to trade less unintelligently was that my initial operations seldom showed me a loss. That naturally made me decide to start big. It gave me confidence in my own judgment before I allowed it to be vitiated by the advice of others or even by my own impatience at times. Without faith in his own judgment no man can go very far in this game. That is about all I have learned—to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary. I have been short one hundred thousand shares and I have seen a big rally coming. I have figured—and figured correctly—that such a rally as I felt was inevitable, and even wholesome, would make a difference of one million dollars in my paper profits. And I nevertheless have stood pat and seen half my paper profit wiped out, without once considering the advisability of covering my shorts to put them out again on the rally. I knew that if I did I might lose my position and with it the certainty of a big killing. It is the big swing that makes the big money for you.

After I began trading more sensibly, I studied my trades at Fullerton’s office and noticed something else. My initial trades seldom showed a loss. That naturally led me to decide to start with a large position. It gave me confidence in my own judgment before I let other people’s advice or sometimes my own impatience weaken it. Without faith in his own judgment, no man can go very far in this game. That is about all I have learned: study general conditions, take a position and stick to it. I can wait without feeling the slightest impatience. I can see a setback without being shaken, knowing it is only temporary. I have been short one hundred thousand shares and seen a big rally coming. I figured that such a rally was inevitable and even healthy. I also figured that it would reduce my paper profits by one million dollars, and I was right. Even so, I held my position and watched half my paper profit disappear. I never once considered covering my shorts and selling short again during the rally. I knew that if I did, I might lose my position and with it the certainty of a big killing. It is the big swing that makes you the big money.

If I learned all this so slowly it was because I learned by my mistakes, and some time always elapses between making a mistake and realizing it, and more time between realizing it and exactly determining it. But at the same time I was faring pretty comfortably and was very young, so that I made up in other ways. Most of my winnings were still made in part through my tape reading because the kind of markets we were having lent themselves fairly well to my method. I was not losing either as often or as irritatingly as in the beginning of my New York experiences. It wasn’t anything to be proud of, when you think that I had been broke three times in less than two years. And as I told you, being broke is a very efficient educational agency.

If I learned all this so slowly, it was because I learned from my mistakes. Some time always passes between making a mistake and realizing it. It takes even more time to determine exactly what the mistake was. But I was doing fairly well and was very young, so I made up for it in other ways. I still made most of my winnings partly through reading the tape. The markets we were having suited my method fairly well. I wasn’t losing as often or as irritatingly as I had at the beginning of my New York experiences. That was nothing to be proud of, considering I had been broke three times in less than two years. And as I told you, being broke is a very effective education.

I was not increasing my stake very fast because I lived up to the handle all the time. I did not deprive myself of many of the things that a fellow of my age and tastes would want. I had my own automobile and I could not see any sense in skimping on living when I was taking it out of the market. The ticker only stopped Sundays and holidays, which was as it should be. Every time I found the reason for a loss or the why and how of another mistake, I added a brand-new Don’t! to my schedule of assets. And the nicest way to capitalize my increasing assets was by not cutting down on my living expenses. Of course I had some amusing experiences and some that were not so amusing, but if I told them all in detail I’d never finish. As a matter of fact, the only incidents that I remember without special effort are those that taught me something of definite value to me in my trading; something that added to my store of knowledge of the game—and of myself!

My stake was not growing very fast because I spent all the money I made. I did not deny myself many things a fellow my age, with my tastes, would want. I had my own car. I saw no sense in living frugally when I was making money in the market. The stock ticker stopped only on Sundays and holidays, as it should. Whenever I figured out the reason for a loss or how and why I had made another mistake, I added a brand-new Don’t! to my list of assets. And the nicest way to take advantage of my growing assets was to keep spending as much as ever. Of course, I had some amusing experiences and some that were not so amusing. But if I told them all in detail, I would never finish. In fact, the only incidents I remember without trying are those that taught me something of definite value in my trading. They added to what I knew about the game and about myself!