Reminiscences of a Stock Operator...

…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. 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 always was 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. 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. (Chapter V pg 54-55)

His story tells plainly you have to be a failure before you can be a winner. This is if you learn from your mistakes. Quote like this text will remain true tomorrow. It was written as a true insight in to the heart and soul of a trader. We see little of this today as traders mask their edge and protect their tinyest remarks in technical wrappings. He was not afraid to tell these truths. Or scared that others could use these things to overtake him.

 

So I think generic things like "don't fight the market," or "general conditions have to be right" are things that are just plain obvious these days, so I don't count those as "lessons."

I like how the book goes into the various ways he lost money to re-enforce that practically anything can go wrong (like the time where the coffee shorts successfully lobbied the govt to intervene on their behalf and change the rules in favor of their positions). That is a good reminder of how at any time black swans can pop up. I also like the guidelines on how to put on your position: build into it. But at the same time, how many of us are really big enough to have our activity move the market? Even 10k or 20k share orders don’t make a blip.

"Never be mad at the market" is a good enough mantra I guess. When you're wrong you're wrong. About being wrong: at times he talks about you just having to admit being wrong and take your lumps. At other times he talks about how bad selling is, and that would cause you to "lose your position." I know we could take it to mean "right about conditions" vs. "right about the specific stock deal," but still that struck me as contradictory. Also his activity struck me as a little ADD induced: either everything is cool, and you stay in your (HUGE) position, or, if conditions change sufficiently to make you want to exit you might as well immediately to go the other way (otherwise the reason for exiting your position wasn’t good enough). And if there’s reason enough to put on any position, you should put on huge size. It just seems really compulsive…

I think that a lot of his game wouldn't work today. There aren’t groups of company insiders who physically manipulate prices up or down to milk the public. There aren’t just a handful of players that “swing a big line” whose intentions can be fathomed at any given time. Tradable Insider data doesn’t come to individuals early anymore. All that stuff is illegal now. No syndicates of insiders exist to trick investors into going short and then squeeze the hell out of them. With all the reporting requirements, restrictions on price manipulation, and massive volume in today’s markets those days are long gone. I simply don’t think players these days have the resources to put on 25 or 30% of the entire capital stock on a spec play… (but then at the same time I think of what happened to oil, fertilizer and dry goods shipping last year…)

^ This last paragraph I am most interested in reading discussion on. Maybe all that stuff still exists in some morphed form that just hasn’t entered my little (very little) universe of understanding yet…

 

thaks for 2 very good posts,human nature is still around and doesnt seem to change much