What old Mr. Partridge

Discussion in 'Psychology' started by chewbacca, Aug 26, 2005.

  1. 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.
    I think it was a long step forward in my trading 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.
    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. Old Turkey was dead right in doing and
    saying what he did. He had not only the courage of his
    convictions but 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
    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.
    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.
  2. Holmes


    One of my most favourite parts from the book!


  3. As we know, Livermore died by his own hand and with wealth a mere fraction of its 1929 peak (not to mention boom and bust on two prior occasions).

    "Speculating" on the reason(s) for this I would venture to say included the advent of the Federal Reserve and other government programs which buffer the natural boom and busts of true markets. Livermore didn't fully adjust to government intervention. Today we are purported to have the Plunge Protection Team, which in theory works against shorting.

    As for the sitting, I'd tend to agree to a degree with that but to incur severe drawdowns, for me, is one of the drawbacks to trend following and takes a great deal of mettle (and capital). And in extreme or conentrated cases, the margin clerk may pull away your chair.

    Perhaps it was easier in Mr. Partridge's day to ascertain WHEN the trend has changed from bullish to bearish. But...just HOW does one define "trend"? 1982 to 2000? March 2003 to the present? Until the 50 ma crosses below the 200? Until a rising ADX peaks? Until the 5 day ma crosses below the 20 day?

    The markets are not as "pure" as they were in the early 20th century, and information is instantaneous (and not limited to the affluent).

    Lassiez faire.
  4. If you like Reminiscences you must read "Jesse Livermore the worlds greatest stock trader". Its in biographical form. You will recognize his trading exploits from ROASO but it has details. For example ROASO references the time JL cornered cotton prior to WW1. But in "JL worlds greatest stock trader" the author talks about how JL`s oldest son is sitting with him and says "father, tell me a story you never told anyone else" and JL goes on to tell his son how the president and secretary of agriculture asked him to lay lay off cotton and unwind his positions in the name of patriotism. And he does, even though he would have made millions on the trade. Fantastic individual...just a shame he didn't live in in a time when they could have diagnosed depression and treated it.
  5. Holmes


    The way the man lived his life, how he ended it and how much fortune he left behind is his own business and it is not for us to judge him on that. It is immaterial to our trading.

    We need to look at his trading exploits instead, and they are worth great study as they are just as applicable today as in his days.

    There is nothing new under the sun, least of all in trading. Just because the late 20th Century had such a tremendous boom and that every Joe Bloggs and his mates Tom, Dick and Harry made money without any effort does not mean that it is now harder than xx years ago. You are only setting yourself up for failure if you go down that path.

    In fact the market is about the same now as in Livermoore's days. Just more stocks to pick from and higher volume, that is all. Livermoore would have found even more opportunities today than in his days.

  6. What's interesting about that book is that Livermore invented screen trading.

    He had assistants chalk the prices of certain key stocks. They had open phone lines to the floor so Livermore got the latest changes.

    Livermore installed glass windows on one wall of his inner office which looked at the chalk board. He created a screen that he traded from.
  7. Yes. I love when he tells his son Paul in a rare moment of affection "the quotes sing to me...they are telling me a story that nobody else can hear or see like the conductor of a symphony orchestra". You can argue he also created trading alerts or signals. In the book it talks about the hieroglyphics he had posted on the quote board by the board men. When asked by the rare visitor to his office what they meant JL would say " the stocks are talking to me" :D