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.
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.
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.
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. Sherlock
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.
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"