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to Jesse Lauriston Livermore

REMINISCENCES OF A STOCK OPERATOR by Edwin LeFevre The Sun Dial Press,  Inc. Garden City, New York Copyright 1923, by George H. Doran Company

Reminiscences of a Stock Operator

Chapter I

I went to work when I was just out of grammar school. I got a job as quotation-board  boy in a stockbrokerage office. I was quick at figures. At school I did three years of  arithmetic in one. I was particularly good at mental arithmetic. As quotation-board boy I  posted the numbers on the big board in the customers' room. One of the customers  usually sat by the ticker and called out the prices. They couldn't come too fast for me. I  have always remembered figures. No trouble at all.

There were plenty of other employees in that office. Of course I made friends with the  other fellows, but the work I did, if the market was active, kept me too busy from ten  a.m. to three p.m. to let me do much talking. I don't care for it, anyhow, during business  hours.

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But a busy market did not keep me from thinking about the work. Those quotations did  not represent prices of stocks to me, so many dollars per share. They were numbers. Of  course, they meant something. They were always changing. It was all I had to be interested in the changes. Why did they change? I didn't know. I didn't care. I didn't  think about that. I simply saw that they changed. That was all I had to think about five  hours every day and two on Saturdays: that they were always changing.

That is how I first came to be interested in the behaviour of prices. I had a very good  memory for figures. I could remember in detail how the prices had acted on the previous  day, just before they went up or down. My fondness for mental arithmetic came in very  handy.

Stock Market Manipulations – How Market is Manipulated?

I noticed that in advances as well as declines, stock prices were apt to show certain  habits, so to speak. There was no end of parallel cases and these made precedents to guide me. I was only fourteen, but after I had taken hundreds of observations in my

Dealing With Legally Manipulated Stock Prices
Institutional investors can manipulate stock prices with their large buying power. Learn how to recognize the trend and what you can do about it.

- 1 -

The Wyckoff Method: A Tutorial [ChartSchool]

Reminiscences of a Stock Operator

mind I found myself testing their accuracy, comparing the behaviour of stocks to-day  with other days. It was not long before I was anticipating movements in prices. My only  guide, as I say, was their past performances. I carried the "dope sheets" in my mind. I  looked for stock prices to run on form. I had "clocked" them. You know what I mean.

You can spot, for instance, where the buying is only a trifle better than the selling. A  battle goes on in the stock market and the tape is your telescope. You can depend upon it  seven out of ten cases.

Another lesson I learned early is that there is nothing new in Wall Street. There can't be  because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again. I've never forgotten that. I suppose I really  manage to remember when and how it happened. The fact that I remember that way is  my way of capitalizing experience.

I got so interested in my game and so anxious to anticipate advances and declines in all  the active stocks that I got a little book. I put down my observations in it. It was not a record of imaginary transactions such as so many people keep merely to make or lose  millions of dollars without getting the swelled head or going to the poorhouse. It was  rather a sort of record of my hits and misses, and next to the determination of probable  movements I was most interested in verifying whether I had observed accurately; in  other words, whether I was right.

Say that after studying every fluctuation of the day in an active stock I would conclude  that it was behaving as it always did before it broke eight or ten points. Well, I would jot  down the stock and the price on Monday, and remembering past performances I would  write down what it ought to do on Tuesday and Wednesday. Later I would check up  with actual transcriptions from the tape.

That is how I first came to take an interest in the message of the tape. The fluctuations  were from the first associated in my mind with upward or downward movements. 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. The reason for what a certain stock does  to-day may not be known for two or three days, or weeks, or months. But what the  dickens does that matter? Your business with the tape is now not tomorrow. The reason  can wait. But you must act instantly or be left. Time and again I see this happen. You'll

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Reminiscences of a Stock Operator

remember that Hollow Tube went down three points the other day while the rest of the market rallied sharply. That was the fact. On the following Monday you saw that the  directors passed the dividend. That was the reason. They knew what they were going to  do, and even if they didn't sell the stock themselves they at least didn't buy it There was  no inside buying; no reason why it should not break.

Well, I kept up my little memorandum book perhaps six months. Instead of leaving for  home the moment I was through with my work, I'd jot down the figures I wanted and  would study the changes, always looking for the repetitions and parallelisms of  behaviour learning to read the tape, although I was not aware of it at the time.

One day one of the office boys he was older than I came to me where I was eating my lunch and asked me on the quiet if I had any money.

"Why do you want to know?" I said.

"Well," he said, "I've got a dandy tip on Burlington. I'm going to play it if I can get somebody to go in with me."

"How do you mean, play it?" I asked. To me the only people who played or could play  tips were the customers old jiggers with oodles of dough. Why, it cost hundreds, even  thousands of dollars, to get into the game. It was like owning your private carriage and  having a coachman who wore a silk hat.

Stock Market Manipulations – How Market is Manipulated?

"That's what I mean; play it!" he said.

"How much you got?"

"How much you need?"

"Well, I can trade in five shares by putting up $5."

"How are you going to play it?"

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"I'm going to buy all the Burlington the bucket shop will let me carry with the money I  give him for margin," he said. "It's going up sure. It's like picking up money. We'll  double ours in a jiffy."

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Reminiscences of a Stock Operator

"Hold on!" I said to him, and pulled out my little dope book.

I wasn't interested in doubling my money, but in his saying that Burlington was going  up. If it was, my note-book ought to show it. I looked. Sure enough, Burlington, according to my figuring, was acting as it usually did before it went up. I had never  bought or sold anything in my life, and I never gambled with the other boys. But all I  could see was that this was a grand chance to test the accuracy of my work, of my hobby. It struck me at once that if my dope didn't work in practice there was nothing in  the theory of it to interest anybody. So I gave him all I had, and with our pooled  resources he went to one of the nearby bucket shops and bought some Burlington. Two  days later we cashed in. I made a profit of $3.12.

After that first trade, I got to speculating on my own hook in the bucket shops. I'd go  during my lunch hour and buy or sell it never made any difference to me. I was playing  a system and not a favorite stock or backing opinions. All I knew was the arithmetic of  it. As a matter of fact, mine was the ideal way to operate in a bucket shop, where all that  a trader does is to bet on fluctuations as they are printed by the ticker on the tape.

It was not long before I was taking much more money out of the bucket shops than I was  pulling down from my job in the brokerage office. So I gave up my position. My folks  objected, but they couldn't say much when they saw what I was making. I was only a kid  and office-boy wages were not very high. I did mighty well on my own hook.

I was fifteen when I had my first thousand and laid the cash in front of my mother all made in the bucket shops in a few months, besides what I had taken home. My mother  carried on something awful. She wanted me to put it away in the savings bank out of  reach of temptation. She said it was more money than she ever heard any boy of fifteen  had made, starting with nothing. She didn't quite believe it was real money. She used to  worry and fret about it. But I didn't think of anything except that I could keep on proving  my figuring was right. That's all the fun there is being right by using your head. If I was  right when I tested my convictions with ten shares I would be ten times more right if I  traded in a hundred shares. That is all that having more margin meant to me I was right

more emphatically. More courage? No! No difference! If all I have is ten dollars and I  risk it, I am much braver than when I risk a million, if I have another million salted  away.

Anyhow, at fifteen I was making a good living out of the stock market. I began in the  - 4 -

Reminiscences of a Stock Operator

smaller bucket shops, where the man who traded in twenty shares at a clip was suspected  of being John W. Gates in disguise or J. P. Morgan traveling incognito. Bucket shops in those days seldom lay down on their customers. They didn't have to. There were other  ways of parting customers from their money, even when they guessed right. The  business was tremendously profitable. When it was conducted legitimately I mean  straight, as far as the bucket shop went the fluctuations took care of the shoestrings. It doesn't take much of a reaction to wipe out a margin of only three quarters of a point.  Also, no welsher could ever get back in the game. Wouldn't have any trade.

I didn't have a following. I kept my business to myself. It' was a one-man business,  anyhow. It was my head, wasn't it? Prices either were going the way I doped them out,  without any help from friends or partners, or they were going the other way, and nobody  could stop them out of kindness to me. I couldn't see where I needed to tell my business  to anybody else. I've got friends, of course, but my business has always been the same a  one-man affair. That is why I have always Played a lone hand.

As it was, it didn't take long for the bucket shops to get sore on me for beating them. I'd  walk in and plank down my margin, but they'd look at it without making a move to grab  it. They'd tell me there was nothing doing. That was the time they got to calling me the  Boy Plunger. I had to be changing brokers all the time, going from one bucket shop to  another. It got so that I had to give a fictitious name. I'd begin light, only fifteen or  twenty shares. At times, when they got suspicious, I'd lose on purpose at first and then  sting them proper. Of course after a little while they'd find me too expensive and they'd tell me to take myself and my business elsewhere and not interfere with the owners'  dividends.

Once, when the big concern I'd been trading with for months shut down on me I made  up my mind to take a little more of their money away from them. That bucket shop had  branches all over the city, in hotel lobbies, and in near-by towns. I went to one of the  hotel branches and asked the manager a few questions and finally got to trading. But as  soon as I played an active stock my especial way he began to get messages from the

head office asking who it was that was operating. The manager told me what they asked him and I told him my name was Edward Robinson, of Cambridge. He telephoned the  glad news to the big chief. But the other end wanted to know what I looked like. When  the manager told me that I said to him, "Tell him I am a short fat man with dark hair and  a bushy beard!" But he described me instead, and then he listened and his face got red

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Reminiscences of a Stock Operator

and he hung up and told me to beat it.

"What did they say to you?" I asked him politely.

"They said, 'You blankety-blank fool, didn't we tell you to take no business from Larry  Livingston? And you deliberately let him trim us out of $700!'' He didn't say what else  they told him.

I tried the other branches one after another, but they all got to know me, and my money  wasn't any good in any of their offices. I couldn't even go in to look at the quotations  without some of the clerks making cracks at me. I tried to get them to let me trade at  long intervals by dividing my visits among them all. But that didn't work.

Finally there was only one left to me and that was the biggest and richest of all the  Cosmopolitan Stock Brokerage Company.

The Cosmopolitan was rated as A-1 and did an enormous business. It had branches in  every manufacturing town in New England. They took my trading all right, and I bought  and sold stocks and made and lost money for months, but in the end it happened with  them as usual. They didn't refuse my business point-blank, as the small concerns had.  Oh, not because it wasn't sportsmanship, but because they knew it would give them a  black eye to publish the news that they wouldn't take a fellow's business just because  that fellow happened to make a little money. But they did the next worse thing that is,  they made me put up a three-point margin and compelled me to pay a premium at first of  a half point, then a point, and finally, a point and a half. Some handicap, that! How? Easy! Suppose Steel was selling at 90 and you bought it. Your ticket read, normally:  "Bot ten Steel at 90-1/8." If you put up a point margin it meant that if it broke 89-1/4  you were wiped out automatically. In a bucket shop the customer is not importuned for  more margin or put to the painful necessity of telling his broker to sell for anything he  can get.

But when the Cosmopolitan tacked on that premium they were hitting below the belt. It  meant that if the price was 90 when I bought, instead of making my ticket: "Bot Steel at  90-l/8," it read: "Bot Steel at 91-1/8." Why, that stock could advance a point and a  quarter after I bought it and I'd still be losing money if I closed the trade. And by also  insisting that I put up a three-point margin at the very start they reduced my trading

capacity by two thirds. Still, that was the only bucket shop that would take my business   - 6 -

Reminiscences of a Stock Operator

at all, and I had to accept their terms or quit trading.

Of course I had my ups and downs, but was a winner on balance. However, the  Cosmopolitan people were not satisfied with the awful handicap they had tacked on me,  which should have been enough to beat anybody. They tried to double-cross me. They  didn't get me. I escaped because of one of my hunches.

The Cosmopolitan, as I said, was my last resort. It was the richest bucket shop in New  England, and as a rule they put no limit on a trade. I think I was the heaviest individual  trader they had that is, of the steady, every-day customers. They had a fine office and the  largest and completest quotation board I have ever seen anywhere. It ran along the  whole length of the big room and every imaginable thing was quoted. I mean stocks  dealt in on the New York and Boston Stock Exchanges, cotton, wheat, provisions,

metals everything that was bought and sold in New York, Chicago, Boston and  Liverpool.

You know how they traded in bucket shops. You gave your money to a clerk and told  him what you wished to buy or sell. He looked at the tape or the quotation board and  took the price from there the last one, of course. He also put down the time on the ticket  so that it almost read like a regular broker's report that is, that they had bought or sold  for you so many shares of such a stock at such a price at such a time on such a day and  how much money they received from you. When you wished to close your trade you  went to the clerk the same or another, it depended on the shop and you told him. He took  the last price or if the stock had not been active he waited for the next quotation that  came out on the tape. He wrote that price and the time on your ticket, O.K.'d it and gave  it back to you, and then you went to the cashier and got whatever cash it called for. Of  course, when the market went against you and the price went beyond the limit set by  your margin, your trade automatically closed itself and your ticket became one more  scrap of paper.

In the humbler bucket shops, where people were allowed to trade in as little as five shares, the tickets were little slips different colors for buying and selling and at times, as  for instance in boiling bull markets, the shops would be hard hit because all the  customers were bulls and happened to be right. Then the bucket shop would deduct both  buying and selling commissions and if you bought a stock at 20 the ticket would read  20-1/4. You thus had only 3/4 of a point's run for your money.

- 7 -

Reminiscences of a Stock Operator

But the Cosmopolitan was the finest in New England. It had thousands of patrons and I  really think I was the only man they were afraid of. Neither the killing premium nor the three-point margin they made me put up reduced my trading much. I kept on buying and  selling as much as they'd let me. I sometimes had a line of 5000 shares.

Well, on the day the thing happened that I am going to tell you, I was short thirty-five  hundred shares of Sugar. I had seven big pink tickets for five hundred shares each. The  Cosmopolitan used big slips with a blank space on them where they could write down  additional margin. Of course, the -bucket shops never ask for more margin. The thinner  the shoestring the better for them, for their profit lies in your being wiped. In the smaller  shops if you wanted to margin your trade still further they'd make out a new ticket, so  they could charge you the buying commission and only give you a run of 3/4 of a point on each point's decline, for they figured the selling commission also exactly as if it were  a new trade.

Well, this day I remember I had up over $10,000 in margins.

I was only twenty when I first accumulated ten thousand dollars in cash. And you ought  to have heard my mother. You'd have thought that ten thousand dollars in cash was more  than anybody carried around except old John D., and she used to tell me to be satisfied  and go into some regular business. I had a hard time convincing her that I was not

gambling, but making money by figuring. But all she could see was that ten thousand  dollars was a lot of money and all I could see was more margin.

I had put out my 3509 shares of Sugar at 105-1/4. There was another fellow in the room, Henry Williams, who was short 2500 shares. I used to sit by the ticker and call out the  quotations for the board boy. The price behaved as I thought it would. It promptly went  down a couple of points and paused a little to get its breath before taking another dip.  The general market was pretty soft and everything looked promising. Then all of a  sudden I didn't like the way Sugar was doing its hesitating. I began to feel  uncomfortable. I thought I ought to get out of the market. Then it sold at 103 that was  low for the day but instead of feeling more confident I felt more uncertain. I knew  something was wrong somewhere, but I couldn't spot it exactly. But if something was  coming and I didn't know where from, I couldn't be on my guard against it. That being  the case I'd better be out of the market.

You know, I don't do things blindly. I don't like to. I never did. Even as a kid I had to   - 8 -

Reminiscences of a Stock Operator

know why I should do certain things. But this time I had no definite reason to give to myself, and yet I was so uncomfortable that I couldn't stand it. I called to a fellow I  knew, Dave Wyman, and said to him : "Dave, you take my place here. I want you to do  something for me. Wait a little before you call out the next price of Sugar, will you?"

He said he would, and I got up and gave him my place by the ticker so he could call out  the prices for the boy. I took my seven Sugar tickets out of my pocket and walked over  to the counter, to where the clerk was who marked the tickets when you closed your  trades. But I didn't really know why I should get out of the market, so I just stood there,  leaning against the counter, my tickets in my hand so that the clerk couldn't see them.

Pretty soon I heard the clicking of a telegraph instrument and I saw Tom Burnham, the  clerk, turn his head quickly and listen. Then I felt that something crooked was hatching,  and I decided not to wait any longer. Just then Dave Wyman by the ticker, began: "Su-" and quick as a flash I slapped my tickets on the counter in front of the clerk and yelled,  "Close Sugar!" before Dave had finished calling the price. So, of course, the house had  to close my Sugar at the last quotation. What Dave called turned out to be 103 again.

According to my dope Sugar should have broken 103 by now. The engine wasn't hitting  right. I had the feeling that there was a trap in the neighborhood. At all events, the  telegraph instrument was now going like mad and I noticed that Tom Burnham, the  clerk, had left my tickets unmarked where I laid them, and was listening to the clicking  as if he were waiting for something. So I yelled at him: "Hey, Tom, what in hell are you  waiting for? Mark the price on these tickets 103! Get a gait on!"

Everybody in the room heard me and began to look toward us and ask what was the  trouble, for, you see, while the Cosmopolitan had never laid down, there was no telling, and a run on a bucket shop can start like a run on a bank. If one customer gets suspicious  the others follow suit. So Tom looked sulky, but came over and marked my tickets  "Closed at 103" and shoved the seven of them over toward me. He sure had a sour face.

Say, the distance from Tom's place to the cashier's cage "wasn't over eight feet. But I  hadn't got to the cashier to get my money when Dave Wyman by the ticker yelled  excitedly: "Gosh! Sugar, 108!" But it was too late; so I just laughed and called over to  Tom, "It didn't work that time, did it, old boy?"

Of course, it was a put-up job. Henry Williams and I together were short six thousand shares of Sugar. That bucket shop had my margin and Henry's, and there may have been

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Reminiscences of a Stock Operator

a lot of other Sugar shorts in the office; possibly eight or ten thousand shares in all.  Suppose they had $20,000 in Sugar margins. That was enough to pay the shop to thimblerig the market on the New York Stock Exchange and wipe us out. In the old days  whenever a bucket shop found itself loaded with too many bulls on a certain stock it was  a common practice to get some broker to wash down the price of that particular stock far  enough to wipe out all the customers that were long of it. This seldom cost the bucket  shop more than a couple of points on a few hundred shares, and they made thousands of  dollars.

That was what the Cosmopolitan did to get me and Henry Williams and the other Sugar  shorts. Their brokers in New York ran up the price to 108. Of course it fell right back,  but Henry and a lot of others were wiped out. 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.

And the funniest thing was that not later than ten days after the Cosmopolitan people  tried to double-cross me a New York operator did them out of over seventy thousand  dollars. This man, who was quite a market factor in his day and a member of the New  York Stock Exchange, made a great name for himself as a bear during the Bryan panic  of '96. He was forever running up against Stock Exchange rules that kept him from

carrying out some of his plans at the expense of his fellow members. One day he figured  that there would be no complaints from either the Exchange or the police authorities if  he took from the bucket shops of the land some of their ill-gotten gains. In the instance I  speak of he sent thirty-five men to act as customers. They went to the main office and to  the bigger branches. On a certain day at a fixed hour the agents all bought as much of a  certain stock as the managers would let them. They had instructions to sneak out at a  certain profit. Of course what he did was to distribute bull tips on that stock among his  cronies and then he went in to the floor of the Stock Exchange and bid up the price, helped by the room traders, who thought he was a good sport Being careful to pick out

the right stock for that work, there was no trouble in putting up the price three or four  points. His agents at the bucket shops cashed in as prearranged.

A fellow told me the originator cleaned up seventy thousand dollars net, and his agents  made their expenses and then pay besides. He played that game several times all over  the country, punishing the bigger bucket shops of New York, Boston, Philadelphia,  Chicago, Cincinnati and St. Louis. One of his favorite stocks was Western Union,

- 10 -

Reminiscences of a Stock Operator

because it was so easy to move a semi active stock like that a few points up en-down. His agents bought it at a certain figure, sold at two points profit, went short and took  three points more. By the way, I read the other day that that man died, poor and obscure.  If he had died in 1896 he would have got at least a column on the first page of every  New York paper. As it was he got two lines on the fifth.

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Reminiscences of a Stock Operator

Chapter II

Between the discovery that the Cosmopolitan Stock Brokerage Company was ready to  beat me by foul means if the killing handicap of a three-point margin and a point-and-a half premium didn't do it, and hints that they didn't want my business anyhow, I soon  made up my mind to go to New York, where I could trade in the office of some member  of the New York Stock Exchange. I didn't want any Boston branch, where the quotations  had to be telegraphed. I wanted to be close to the original source. I came to New York at  the age of 21, bringing with me all I had, twenty-five hundred dollars.

I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar  deal was over ten thousand. But I didn't always win. My plan of trading was sound  enough and won oftener than it lost. If I had stuck to it I'd have been right perhaps as  often as seven out of ten times. In fact, I always made money when I was sure I was  right before I began. 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. There is a time for all things, but I didn't know it. And that is precisely what beats  so many men in Wall Street who are very far from being in the main sucker class. There  is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall  Street fool, who thinks he must trade all the time. No man can always have adequate  reasons for buying or selling stocks daily or sufficient knowledge to make his play an  intelligent play.

I proved it Whenever I read the tape by the light of experience I made money, but when  I made a plain fool play I had to lose. I was no exception, was I? There was the huge  quotation board staring me in the face, and the ticker going on, and people trading and  watching their tickets turn" into cash or into waste paper. Of course I let the craving for  excitement get the better of my judgment. In a bucket shop where your margin is a  shoestring you don't play for long pulls. You are wiped too easily and quickly. The

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Reminiscences of a Stock Operator

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. I was only a  kid, remember. I did not know then what I learned later, what made me fifteen years  later, wait two long weeks and see a stock on which I was very bullish go up thirty  points before I felt that it was safe to buy it. I was broke and was trying to get back, and  I couldn't afford to play recklessly. I had to be right, and so I waited. That was in 1915.

It's a long story. I'll tell it later in its proper place. Now let's go on from where after years  of practice at beating them I let the bucket shops take away most of my winnings.

And with my eyes wide open, to boot! And it wasn't the only period of my life when I  did it, either. A stock operator has to fight a lot of expensive enemies within himself.  Anyhow, I came to New York with twenty-five hundred dollars. There were no bucket  shops here that a fellow could trust. The Stock Exchange and the police between them  had succeeded in closing them up pretty tight. Besides, I wanted to find a place where  the only limit to my trading would be the size of my stake. I didn't have much of one,  but I didn't expect it to stay little forever. The main thing at the start was to find a place  where I wouldn't have to worry about getting a square deal. So I went to a New York  Stock Exchange house that had a branch at home where I knew some of the clerks. They have long since gone out of business. I wasn't there long, didn't like one of the partners,  and then I went to A. R. Fullerton & Co. Somebody must have told them about my early  experiences, because it was not long before they all got to calling me the Boy Trader.  I've always looked young. It was a handicap in some ways but it compelled me to fight  for my own because so many tried to take advantage of my youth. The chaps at the  bucket shops seeing what a kid I was, always thought I was a fool for luck and that that  was the only reason why I beat them so often.

Well, it wasn't six months before I was broke. I was a pretty active trader and had a sort  of reputation as a winner. I guess my commissions amounted to something. I ran up my account quite a little, but, of course, in the end I lost. I played carefully; but I had to lose.  I'll tell you the reason: it was my remarkable success in the bucket shops!

I could beat the game my way only in a bucket shop; where I was betting on  fluctuations. My tape reading had to do with that exclusively. When I bought the price  was there on the quotation board, right in front of me. Even before I bought I knew  exactly the price I'd have to pay for my stock. And I always could sell on the instant. I

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Reminiscences of a Stock Operator

could scalp successfully, because I could move like lightning. I could follow up my luck  or cut my loss in a second. Sometimes, for instance, I was certain a stock would move at  least a point. Well, I didn't have to hog it, I could put up a point margin and double my  money in a jiffy; or I'd take half a point. On one or two hundred shares a day, that  wouldn't be bad at the end of the month, what?

The practical trouble with that arrangement, of course, was that even if the bucket shop  had the resources to stand a big steady loss, they wouldn't do it. They wouldn't have a  customer around the place who had the bad taste to win all the time.

At all events, what was a perfect system for trading in bucket shops didn't work in  Fullerton's office. There I was actually buying and selling stocks. The price of Sugar on  the tape might be 105 and I could see a three-point drop coming. As a matter of fact, at  the very moment the ticker was printing 105 on the tape the real price on the floor of the  Exchange might be 104 or 103. By the time my order to sell a thousand shares got to

Fullerton's floor man to execute, the price might be still lower. I couldn't tell at what  price I had put out my thousand shares until I got a report from the clerk. When I surely  would have made three thousand on the same transaction in a bucket shop I might not make a cent in a Stock Exchange house. Of course, I have taken an extreme case, but the  fact remains that in A. R. Fullerton's office the tape always talked ancient history to me, as far as my system of trading went, and I didn't realise it.

And then, too, if my order was fairly big my own sale would tend further to depress the  price. In the bucket shop I didn't have to figure on the effect of my own trading. I lost in  New York because the game was altogether different. It was not that I now was playing  it legitimately that made me lose, but that I was playing it ignorantly. I have been told  that I am a good reader of the tape. But reading the tape like an expert did not save me. I  might have made out a great deal better if I had been on the floor myself, a room trader.  In a particular crowd perhaps I might have adapted my system to the conditions  immediately before me. But, of course, if I had got to operating on such a scale as I do  now, for instance, the system would have equally failed me, on account of the effect of  my own trading on prices.

In short, I did not know the game of stock speculation. I knew a part of it, a rather  important part, which has been very valuable to me at all times. But if with all I had I  still lost, what chance does the green outsider have of winning, or, rather, of cashing in?

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Reminiscences of a Stock Operator

It didn't take me long to realise that there was something wrong with my play, but I  couldn't spot the exact trouble. There were times when my system worked beautifully,  and then, all of a sudden, nothing but one swat after another. I was only twenty-two,  remember; not that I was so stuck on myself that I didn't want to know just where I was  at fault, but that at that age nobody knows much of anything.

The people in the office were very nice to me. I couldn't plunge as I wanted to because of their margin requirements, but old A. R. Fullerton and the rest of the firm were so  kind to me that after six months of active trading I not only lost all I had brought and all that I had made there but I even owed the firm a few hundreds.

There I was, a mere kid, who had never before been away from home, flat broke; but I  knew there wasn't anything wrong with me; only with my play. I don't know whether I  make myself plain, but I never lose my temper over the stock market. I never argue with  the tape. Getting sore at the market doesn't get you anywhere.

I was so anxious to resume trading that I didn't lose a minute, but went to old man  Fullerton and said to him, "Say, A. R., lend me five hundred dollars."

"What for?" says he. "I've got to have some money."

"What for?" he says again.

"For margin, of course," I said.

"Five hundred dollars?" he said, and frowned. "You know they'd expect you to keep up a 10 per cent margin, and that means one thousand dollars on one hundred shares. Much  better to give you a credit-"

"No," I said, "I don't want a credit here. I already owe the firm something. What I want  is for you to lend me five hundred dollars so I can go out and get a roll and come back."

"How are you going to do it?" asked old A. R. "I'll go and trade in a bucket shop," I told  him.

"Trade here," he said.

"No," I said. "I'm not sure yet I can beat the game in this office, but I am sure I can take   - 15 -

Reminiscences of a Stock Operator

money out of the bucket shops. I know that game. I have a notion that I know just where  I went wrong here."

He let me have it, and I went out of that office where the Boy Terror of the Bucket Shops, as they called him, had lost his pile. I couldn't go back home because the shops  there would not take my business. New York was out of the question; there weren't any  doing business at that time. They tell me that in the go's Broad Street and New Street  were full of them. But there weren't any when I needed them in my business. So after  some thinking I decided to go to St. Louis. I had heard of two concerns there that did an  enormous business all through the Middle West. Their profits must have been huge.  They had branch offices in dozens of towns. In fact I had been told that there were no

concerns in the East to compare with them for volume of business. They ran openly and  the best people traded there without any qualms. A fellow even told me that the owner  of one of the concerns was a vice-president of the Chamber of Commerce but that  couldn't have been in St. Louis. At any rate, that is where I went with my five hundred  dollars to bring back a stake to use as margin in the office of A. R. Fullerton & Co.,  members of the New York Stock Exchange.

When I got to St. Louis I went to the hotel, washed up and went out to find the bucket  shops. One was the

J. G. Dolan Company, and the other was H. S. Teller & Co. I knew I could beat them. I  was going to play dead safe carefully and conservatively. My one fear was that  somebody might recognise me and give me away, because the bucket shops all over the  country had heard of the Boy Trader. They are like gambling houses and get all the  gossip of the professionals. Dolan was nearer than Teller, and I went there first. I was  hoping I might be allowed to do business a few days before they told me to take my trade somewhere else. I walked in. It was a whopping big place and there must have  been at least a couple of hundred people there staring at the quotations. I was glad,  because in such a crowd I stood a better chance of being unnoticed. I stood and watched  the board and looked them over carefully until I picked out the stock for my initial play.

I looked around and saw the order-clerk at the window where you put down your money  and get your ticket. He was looking at me so I walked up to him and asked, "Is this  where you trade in cotton and wheat?"

"Yes, sonny," says he.

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Reminiscences of a Stock Operator

"Can I buy stocks too?"

"You can if you have the cash," he said.

"Oh, I got that all right, all right," I said like a boasting boy.

"You have, have you?" he says with a smile.

"How much stock can I buy for one hundred dollars?" I asked, peeved-like.  "One hundred; if you got the hundred."

"I got the hundred. Yes; and two hundred too!" I told him.

"Oh, my!" he said.

"Just you buy me two hundred shares," I said sharply.

"Two hundred what?" he asked, serious now. It was business.

I looked at the board again as if to guess wisely and told him, "Two hundred Omaha."  "All right!" he said. He took my money, counted it and wrote out the ticket.  "What's your name?" he asked me, and I answered, "Horace Kent."

He gave me the ticket and I went away and sat down among the customers to wait for  the roll to grow.

I got quick action and I traded several times that day. On the next day too. In two days I  made twenty-eight hundred dollars, and I was hoping they'd let me finish the week out.  At the rate I was going, that wouldn't be so bad. Then I'd tackle the other shop, and if I  had similar luck there I'd go back to New York with a wad I could do something with.

On the morning of the third day, when I went to the window, bashful-like, to buy five  hundred B. R. T. the clerk said to me, "Say, Mr. Kent, the boss wants to see you."

I knew the game was up. But I asked him, "What does he want to see me about?"   - 17 -

Reminiscences of a Stock Operator

"I don't know."

"Where is he?"

"In his private office. Go in that way." And he pointed to a door. I went in. Dolan was  sitting at his desk. He swung around and said, "Sit down, Livingston."

He pointed to a chair. My last hope vanished. I don't know how he discovered who I  was; perhaps from the hotel register.

"What do you want to see me about?" I asked him.

"Listen, kid. I ain't got nothin' again yeh, see? Nothin' at all. See?"

"No, I don't see," I said.

He got up from his swivel chair. He was a whopping big guy. He said to me, "Just come over here, Livingston, will yeh?" and he walked to the door. He opened it and then he  pointed to the customers in the big room. "D'yeh see them?" he asked.

"See what?"

"Them guys. Take a look at 'em, kid. There's three hundred of 'em! Three hundred suckers! They feed me and my family. See? Three hundred suckers! Then yeh come in, and in two days yeh cop more than I get out of the three hundred in two weeks. That  ain't business, kid not for me! I ain't got nothin' agin yeh. Yer welcome to what ye've  got. But yeh don't get any more. There ain't any here for yeh!"

"Why, I…"

"That's all. I seen yeh come in day before yesterday, and I didn't like yer looks. On the  level, I didn't. I spotted yeh for a ringer. I called in that jackass there" he pointed to the  guilty clerk "and asked what you'd done; and when he told me I said to him: 'I don't like  that guy's looks. He's a ringer!' And that piece of cheese says: 'Ringer my eye, boss! His

name is Horace Kent, and he's a rah-rah boy playing at being used to long pants. He's all  right!' Well, I let him have his way. That blankety-blank cost me twenty-eight hundred  dollars. I don't grudge it yeh, my boy. But the safe is locked for yeh."

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Reminiscences of a Stock Operator

"Look here " I began.

"You look here, Livingston," he said. "I've heard all about yeh. I make my money  coppering suckers' bets, and yeh don't belong here. I aim to be a sport and yer welcome  to what yeh pried off'n us. But more of that would make me a sucker, now that I know who yeh are. So toddle along, sonny!"

I left Dolan's place with my twenty-eight hundred dollars' profit. Teller's place was in the same block. I had found out that Teller was a very rich man who also ran up a lot of  pool rooms. I decided to go to his bucket shop. I wondered whether it would be wise to  start moderately and work up to a thousand shares or to begin with a plunge, on the  theory that I might not be able to trade more than one day. They get wise mighty quick  when they're losing and I did want to buy one thousand B. R. T. I was sure I could take  four or five points out of it. But if they got suspicious or if too many customers were  long of that stock they might not let me trade at all. I thought perhaps I'd better scatter  my trades at first and begin small.

It wasn't as big a place as Dolan's, but the fixtures were nicer and evidently the crowd was of a better class. This suited me down to the ground and I decided to buy my one  thousand B. R. T. So I stepped up to the proper window and said to the clerk, "I'd like to  buy some B. R. T. What's the limit?"

"There's no limit," said the clerk. "You can buy all you please if you've got the money."

"Buy fifteen hundred shares," I says, and took my roll from my pocket while the clerk  starts to write the ticket.

Then I saw a red-headed man just shove that clerk away from the counter. He leaned  across and said to me, 'Say, Livingston, you go back to Dolan's. We don't want your  business."

"Wait until I get my ticket," I said. "I just bought a little B. R. T."

"You get no ticket here," he said. By this time other clerks had got behind him and were  looking at me. "Don't ever come here to trade. We don't take your business.  Understand?"

There was no sense in getting mad or trying to argue, so I went back to the hotel, paid  - 19 -

Reminiscences of a Stock Operator

my bill and took the first train back to New York. It was tough. I wanted to take back  some real money and that Teller wouldn't let me make even one trade.

I got back to New York, paid Fullerton his five hundred, and started trading again with  the St. Louis money. I had good and bad spells, but I was doing better than breaking  even. After all, I didn't have much to unlearn; only to grasp the one fact that there was more to the game of stock speculation than I had considered before I went to Fullerton's  office to trade. I was like one of those puzzle fans, doing the crossword puzzles in the  Sunday supplement. He isn't satisfied until he gets it. Well, I certainly wanted to find the  solution to my puzzle. I thought I was done with trading in bucket shops. But I was  mistaken.

About a couple of months after I got back to New York an old jigger came into  Fullerton's office. He knew A. R. Somebody said they'd once owned a string of race  horses together. It was plain he'd seen better days. I was introduced to old McDevitt. He  was telling the crowd about a bunch of Western racetrack crooks who had just pulled off  some skin game out in St. Louis. The head devil, he said, was a poolroom owner by the

name of Teller.

"What Teller?" I asked him.

"Hi Teller; H. S. Teller."

"I know that bird," I said.

"He's no good," said McDevitt.

"He's worse than that," I said, "and I have a little matter to settle with him."  "Meaning how?"

"The only way I can hit any of these short sports is through their pocketbook. I can't touch him in St. Louis just now, but some day I will." And I told McDevitt my grievance.

"Well," says old Mac, "he tried to connect here in New York and couldn't make it, so  he's opened a place in Hoboken. The word's gone out that there is no limit to the play  and that the house roll has got the Rock of Gibraltar faded to the shadow of a bantam

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Reminiscences of a Stock Operator


"What sort of a place?" I thought he meant pool room.

"Bucket shop," said McDevitt.

"Are you sure it's open?"

"Yes; I've seen several fellows who've told me about it."

"That's only hearsay," I said. "Can you find out positively if it's running, and also how  heavy they'll really let a man trade?"

"Sure, sonny," said McDevitt. "I'll go myself to-morrow morning, and come back here and tell you."

He did. It seems Teller was already doing a big business and would take all he could get.  This was on a Friday. The market had been going up all that week this was twenty years  ago, remember and it was a cinch the bank statement on Saturday would show a big  decrease in the surplus reserve. That would give the conventional excuse to the big room  traders to jump on the market and try to shake out some of the weak commission-house  accounts. There would be the usual reactions in the last half hour of the trading,  particularly in stocks in which the public had been the most active. Those, of course,  also would be the very stocks that Teller's customers would be most heavily long of, and  the shop might be glad to see some short selling in them. There is nothing so nice as  catching the suckers both ways; and nothing so easy with one-point margins.

That Saturday morning I chased over to Hoboken to the Teller place. They had fitted up  a big customers' room with a dandy quotation board and a full force of clerks and a  special policeman in gray. There were about twenty-five customers.

I got talking to the manager. He asked me what he could do for me and I told him nothing; that a fellow could make much more money at the track on account of the odds  and the freedom to bet your whole roll and stand to win thousands in minutes instead of  piking for chicken feed in stocks and having to wait days, perhaps. He began to tell me  how much safer the stock-market game was, and how much some of their customers  made you'd have sworn it was a regular broker who actually bought and sold your stocks  on the Exchange and how if a man only traded heavy he could make enough to satisfy

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Reminiscences of a Stock Operator

anybody. He must have thought I was headed for some pool room and he wanted a  whack at my roll before the ponies nibbled it away, for he said I ought to hurry up as the  market closed at twelve o'clock on Saturdays. That would leave me free to devote the  entire afternoon to other pursuits. I might have a bigger roll to carry to the track with toe  if I picked the right stocks.

I looked as if I didn't believe him, and he kept on buzzing me. I was watching the clock.  At n 115 I said, "All right," and I began to give him selling orders in various stocks. I  put up two thousand dollars in cash, and he was very glad to get it. He told me he  thought I'd make a lot of money and hoped I'd come in often.

It happened just as I figured. The traders hammered the stocks in which they figured  they would uncover the most stops, and, sure enough, prices slid off. I closed out my  trades just before the rally of the last five minutes on the usual traders' covering.

There was fifty-one hundred dollars coming to me. I went to cash in.  "I am glad I dropped in," I said to the manager, and gave him my tickets.

"Say," he says to me, "I can't give you all of it. I wasn't looking for such a run. I'll have  it here for you Monday morning, sure as blazes."

"All right. But first I'll take all you have in the house," I said.

"You've got to let me pay off the little fellows," he said. "I'll give you back what you put  up, and anything that's left. Wait till I cash the other tickets." So I waited while he paid off the other winners. Oh, I knew my money was safe. Teller wouldn't welsh with the  office doing such a good business. And if he did, what else could I do better than to take  all he had then and there? I got my own two thousand dollars and about eight hundred  dollars besides, which was all he had in the office. I told him I'd be there Monday  morning. He swore the money would be waiting for me.

I got to Hoboken a little before twelve on Monday. I saw a fellow talking to the manager  that I had seen in the St. Louis office the day Teller told me to go back to Dolan. I knew  at once that the manager had telegraphed to the home office and they'd sent up one of  their men to investigate the story. Crooks don't trust anybody.

"I came for the balance of my money," I said to the manager.

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Reminiscences of a Stock Operator

"Is this the man?" asked the St. Louis chap.

"Yes," said the manager, and took a bunch of yellow backs from his pocket.

"Hold on!" said the St. Louis fellow to him and then turns to me, "Say, Livingston, didn't we tell you we didn't want your business?"

"Give me my money first," I said to the manager, and he forked over two thousands,  four five-hundreds and three hundreds.

"What did you say?" I said to St. Louis.

"We told you we didn't want you to trade in our place."

"Yes," I said; "that's why I came."

"Well, don't come any more. Keep away!" he snarled at me. The private policeman in  gray came over, casual-like. St. Louis shook his fist at the manager and yelled: "You  ought to've known better, you poor boob, than to let this guy get into you. He's Livingston. You had your orders."

"Listen, you," I said to the St. Louis man. "This isn't St. Louis. You can't pull off any  trick here, like your boss did with Belfast Boy."

"You keep away from this office! You can't trade here!" he yells.

"If I can't trade here nobody else is going to," I told him. "You can't get away with that  sort of stuff here."

Well, St. Louis changed his tune at once.

"Look here, old boy," he said, all fussed up, "do us a favor. Be reasonable! You know  we can't stand this every day. The old man's going to hit the ceiling when he hears who  it was. Have a heart, Livingston!"

"I'll go easy," I promised.

"Listen to reason, won't you? For the love of Pete, keep away! Give us a chance to get a  good start. We're new here. Will you?"

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Reminiscences of a Stock Operator

"I don't want any of this high-and-mighty business the next time I come," I said, and left him talking to the manager at the rate of a million a minute. I'd got some money out of  them for the way they treated me in St. Louis. There wasn't any sense in my getting hot  or trying to close them up. I went back to Fullerton's office and told McDevitt what had happened. Then I told him that if it was agreeable to him I'd like to have him go to  Teller's place and begin trading in twenty or thirty share lots, to get them used to him. Then, the moment I saw a good chance to clean up big, I'd telephone him and he could  plunge.

I gave McDevitt a thousand dollars and he went to Hoboken and did as I told him. He  got to be one of the regulars. Then one day when I thought I saw a break impending I  slipped Mac the word and he sold all they'd let him. I cleared twenty-eight hundred  dollars that day, after giving Mac his rake-off and paying expenses, and I suspect Mac  put down a little bet of his own besides. Less than a month after that, Teller closed his  Hoboken branch. The police got busy. And, anyhow, it didn't pay, though I only traded  there twice. We ran into a crazy bull market when stocks didn't react enough to wipe out even the one-point margins, and, of course, all the customers were bulls and winning  and pyramiding. No end of bucket shops busted all over the country.

Their game has changed. Trading in the old-fashioned bucket shop had some decided  advantages over speculating in a reputable broker's office. For one thing, the automatic  closing out of your trade when the margin reached the exhaustion point was the best kind of stop-loss order. You couldn't get stung for more than you had put up, and there  was no danger of rotten execution of orders, and so on. In New York the shops never  were as liberal with their patrons as I've heard they were in the West. Here they used to  limit the possible profit on certain stocks of the football order to two points. Sugar and  Tennessee Coal and Iron were among these. No matter if they moved ten points in ten  minutes you could only make two on one ticket. They figured that otherwise the  customer was getting too big odds; he stood to lose one dollar and to make ten. And then  there were times when all the shops, including the biggest, refused to take orders on  certain stocks. In 1900, on the day before Election Day, when it was a foregone  conclusion that McKinley would win, not a shop in the land let its customers buy stocks.  The election odds were 3 to i on McKinley. By buying stocks on Monday you stood to  make from three to six points or more. A man could bet on Bryan and buy stocks and  make sure money. The bucket shops refused orders that day.

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Reminiscences of a Stock Operator

If it hadn't been for their refusing to take my business I never would have stopped  trading in them. And then I never would have learned that there was much more to the game of stock speculation than to play for fluctuations of a few points.

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Reminiscences of a Stock Operator

Chapter III

It takes a man a long time to learn all the lessons of all his mistakes. They say there are  two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general  principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.

I have heard of people who amuse themselves conducting imaginary operations in the  stock market to prove with imaginary dollars how right they are. Sometimes these ghost  gamblers make millions. It is very easy to be a plunger that way. It is like the old story  of the man who was going to fight a duel the next day.

His second asked him, "Are you a good shot?"

"Well," said the duelist, "I can snap the stem of a wineglass at twenty paces," and he  looked modest.

"That's all very well," said the unimpressed second. "But can you snap the stem of the wineglass while the wineglass is pointing a loaded pistol straight at your heart?"

With me I must back my opinions with my money. My losses have taught me that I must  not begin to advance until I am sure I shall not have to retreat. But if I cannot advance I  do not move at all. I do not mean by this that a man should not limit his losses when he  is wrong. He should. But that should not breed indecision. All my life I have made  mistakes, but in losing money I have gained experience and accumulated a lot of  valuable don'ts. I have been flat broke several times, but my loss has never been a total  loss. Otherwise, I wouldn't be here now. I always knew I would have another chance and that I would not make the same mistake a second time. I believed in myself.

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Reminiscences of a Stock Operator

A man must believe in himself and his judgment if he expects to make a living at this game. That is why I don't believe in tips. If I buy stocks on Smith's tip I must sell those same stocks on Smith's tip. I am depending on him. Suppose Smith is away on a holiday  when the selling time comes around? No, sir, nobody can make big money on what  someone else tells him to do. I know from experience that nobody can give me a tip or a  series of tips that will make more money for me than my own judgment. It took me five  years to learn to play the game intelligently enough to make big money when I was  right.

I didn't have as many interesting experiences as you might imagine. I mean, the process of learning how to speculate does not seem very dramatic at this distance. I went broke  several times, and that is never pleasant, but the way I lost money is the way everybody  loses money who loses money in Wall Street. Speculation is a hard and trying business,  and a speculator must be on the job all the time or he'll soon have no job to be on.

My task, as I should have known after my early reverses at Fullerton's, was very simple:  To look at speculation from another angle. But I didn't know that there was much more  to the game than I could possibly learn in the bucket shops. There I thought I was  beating the game when in reality I was only beating the shop. At the same time the tape

reading ability that trading in bucket shops developed in me and the training of my memory have been extremely valuable. Both of these things came easy to me. I owe my early success as a trader to them and not to brains or knowledge, because my mind was  untrained and my ignorance was colossal. The game taught me the game. And it didn't  spare the rod while teaching.

I remember my very first day in New York. I told you how the bucket shops, by refusing  to take my business, drove me to seek a reputable commission house. One of the boys in the office where I got my first job was working for Harding Brothers, members of the New York Stock Exchange. I arrived in this city in the morning, and before one o'clock  that same day I had opened an account with the firm and was ready to trade.

I didn't explain to you how natural it was for me to trade there exactly as I had done in  the bucket shops, where all I did was to bet on fluctuations and catch small but sure  changes in prices. Nobody offered to point out the essential differences or set me right.  If somebody had told me my method would not work I nevertheless would have tried it

out to make sure for myself, for when I am wrong only one thing convinces me of it, and   - 27 -

Reminiscences of a Stock Operator

that is, to lose money. And I am only right when I make money. That is speculating.

They were having some pretty lively times those days and the market was very active. That always cheers up a fellow. I felt at home right away. There was the old familiar quotation board in front of me, talking a language that I had learned before I was fifteen  years old. There was a boy doing exactly the same thing I used to do in the first office I  ever worked in. There were the customers same old bunch looking at the board or  standing by the ticket calling out the prices and talking about the market. The machinery  was to all appearances the same machinery that I was used to. The atmosphere was the  atmosphere I had breathed since I had made my first stock-market money $3.12 in  Burlington. The same kind of ticker and the same kind of traders, therefore the same kind of game. And remember, I was only twenty-two. I suppose I thought I knew the  game from A to Z. Why shouldn't I?

I watched the board and saw something that looked good to me. It was behaving right. I  bought a hundred at 84. I got out at 85 in less than a half hour. Then I saw something  else I liked, and I did the same thing; took three-quarters of a point net within a very  short time. I began well, didn't I?

Now mark this: On that, my first day as a customer of a reputable Stock Exchange  house, and only two hours of it at that, I traded in eleven hundred shares of stock, jumping in and out. And the net result of the day's operations was that I lost exactly  eleven hundred dollars. That is to say, on my first attempt, nearly one-half of my stake  went up the flue. And remember, some of the trades showed me a profit. But I quit eleven hundred dollars minus for the day.

It didn't worry me, because I couldn't see where there was anything wrong with me. My  moves, also, were right enough, and if I had been trading in the old Cosmopolitan shop  I'd have broken better than even. That the machine wasn't as it ought to be, my eleven  hundred vanished dollars plainly told me. But as long as the machinist was all right there  was no need to stew. Ignorance at twenty-two isn't a structural defect.

After a few days I said to myself, "I can't trade this way here. The ticker doesn't help as  it should!" But I let it go at that without getting down to bed rock. I kept it up, having  good days and bad days, until I was cleaned out. I went to old Fullerton and got him to  stake me to five hundred dollars. And I came back from St. Louis, as I told you, with  money I took out of the bucket shops there a game I could always beat.

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Reminiscences of a Stock Operator

I played more carefully and did better for a while. As soon as I was in easy  circumstances I began to live pretty well. I made friends and had a good time. I was not  quite twenty-three, remember; all alone in New York with easy money in my pockets  and the belief in my heart that I was beginning to understand the new machine.

I was making allowances for the actual execution of my orders on the floor of the Exchange, and moving more cautiously. But I was still sticking to the tape that is, I was  still ignoring general principles; and as long as I did that I could not spot the exact  trouble with my game.

We ran into the big boom of 1901 and I made a great deal of money that is, for a boy. You remember those times? The prosperity of the country was unprecedented. We not  only ran into an era of industrial consolidations and combinations of capital that beat  anything we had had up to that time, but the public went stock mad. In previous flush  times, I have heard, Wall Street used to brag of two-hundred-and-fifty-thousand-share  days, when securities of a par value of twenty-five million dollars changed hands. But in 1901 we had a three-million-share day. Everybody was making money. The steel crowd  came to town, a horde of millionaires with no more regard for money than drunken sailors. The only game that satisfied them was the stock market. We had some of the  biggest high rollers the Street ever saw: John W. Gates, of 'Bet-you-a-million' fame, and  his friends, like John A. Drake, Loyal Smith, and the rest; the Reid-Leeds-Moore crowd,  who sold part of their Steel holdings and with the proceeds bought in the open market the actual majority of the stock of the great Rock Island system; and Schwab and Frick  and Phipps and the Pittsburgh coterie; to say nothing of scores of men who were lost in  the shuffle but would have been called great plungers at any other time. A fellow could  buy and sell all the stock there was. Keene made a market for the U. S. Steel shares. A  broker sold one hundred thousand shares in a few minutes. A wonderful time! And there were some wonderful winnings. And no taxes to pay on stock sales! And no day of  reckoning in sight.

Of course, after a while, I heard a lot of calamity howling and the old stagers said  everybody except themselves had gone crazy. But everybody except themselves was  making money. I knew, of course, there must be a limit to the advances and an end to  the crazy buying of A. O. T. Any Old Thing and I got bearish. But every time I sold I  lost money, and if it hadn't been that I ran darn quick I'd have lost a heap more. I looked  for a break, but I was playing safe making money when I bought and chipping it out

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when I sold short so that I wasn't profiting by the boom as much as you'd think when  you consider how heavily I used to trade, even as a boy.

There was one stock that I wasn't short of, and that was Northern Pacific. My tape  reading came in handy. I thought most stocks had been bought to a standstill, but Little  Nipper behaved as if it were going still higher. We know now that both the common and  the preferred were being steadily absorbed by the Kuhn-Loeb-Harriman combination.

Well, I was long a thousand shares of Northern Pacific common, and held it against the  advice of everybody in the office. When it got to about 110 I had thirty points profit, and  I grabbed it. It made my balance at my brokers' nearly fifty thousand dollars, the greatest  amount of money I had been able to accumulate up to that time. It wasn't so bad for a  chap who had lost every cent trading in that selfsame office a few months before.

If you remember, the Harriman crowd notified Morgan and Hill of their intention to be  represented in the Burlington-Great Northern-Northern Pacific combination, and then  the Morgan people at first instructed Keene to buy fifty thousand shares of N. P. to keep  the control in their possession. I have heard that Keene told Robert Bacon to make the  order one hundred and fifty thousand shares and the bankers did. At all events, Keene  sent one of his brokers, Eddie Norton, into the N. P. crowd and he bought one hundred  thousand shares of the stock. This was followed by another order, I think, of fifty  thousand shares additional, and the famous corner followed. After the market closed on  May 8, 1901, the whole world knew that a battle of financial giants was on. No two such  combinations of capital had ever opposed each other in this country. Harriman against  Morgan; an irresistible force meeting an immovable object.

There I was on the morning of May ninth with nearly fifty thousand dollars in cash and  no stocks. As I told you, I had been very bearish for some days, and here was my chance  at last. I knew what would happen an awful break and then some wonderful bargains. There would be a quick recovery and big profits for those who had picked up the  bargains. It didn't take a Sherlock Holmes to figure this out. We were going to have an  opportunity to catch them coming and going, not only for big money but for sure money.

Everything happened as I had foreseen. I was dead right and I lost every cent I had! I  was wiped out by something that was unusual. If the unusual never happened there  would be no difference in people and then there wouldn't be any fun in life. The game would become merely a matter of addition and subtraction. It would make of us a race of

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Reminiscences of a Stock Operator

bookkeepers with plodding minds. It's the guessing that develops a man's brain power.  Just consider what you have to do to guess right.

The market fairly boiled, as I had expected. The transactions were enormous and the  fluctuations unprecedented in extent. I put in a lot of selling orders at the market. When I  saw the opening prices I had a fit, the breaks were so awful. My brokers were on the job.  They were as competent and conscientious as any; but by the time they executed my

orders the stocks had broken twenty points more. The tape was way behind the market  and reports were slow in coming in by reason of the awful rush of business. When I  found out that the stocks I had ordered sold when the tape said the price was, say, 100  and they got mine off at 80, making a total decline of thirty or forty points from the

previous night's close, it seemed to me that I was putting out shorts at a level that made  the stocks I sold the very bargains I had planned to buy. The market was not going to  drop right through to China. So I decided instantly to cover my shorts and go long.

My brokers bought; not at the level that had made me turn, but at the prices prevailing in  the Stock Exchange when their floor man got my orders. They paid an average of fifteen  points more than I had figured on. A loss of thirty-five points in one day was more than  anybody could stand.

The ticker beat me by lagging so far behind the market. I was accustomed to regarding  the tape as the best little friend I had because I bet according to what it told me. But this  time the tape double-crossed me. The divergence between the printed and the actual  prices undid me. It was the sublimation of my previous unsuccess, the selfsame thing  that had beaten me before. It seems so obvious now that tape reading is not enough,  irrespective of the brokers' execution, that I wonder why I didn't then see both my trouble and the remedy for it.

I did worse than not see it; I kept on trading, in and out, regardless of the execution. You see, I never could trade with a limit. I must take my chances with the market. That is  what I am trying to beat the market, not the particular price. When I think I should sell, I  sell. When I think stocks will go up, I buy. My adherence to that general principle of  speculation saved me. To have traded at limited prices simply would have been my old  bucket-shop method inefficiently adapted for use in a reputable commission broker's  office. I would never have learned to know what stock speculation is, but would have

kept on betting on what a limited experience told me was a sure thing.   - 31 -

Reminiscences of a Stock Operator

Whenever I did try to limit the prices in order to minimize the disadvantages of trading  at the market when the ticker lagged, I simply found that the market got away from me. This happened so often that I stopped trying. I can't tell you how it came to take me so  many years to learn that instead of placing piking bets on what the next few quotations  were going to be, my game was to anticipate what was going to happen in a big way.

After my May ninth mishap I plugged along, using a modified but still defective method.  If I hadn't made money some of the time I might have acquired market wisdom quicker.  But I was making enough to enable me to live well. I liked friends and a good time. I  was living down the Jersey Coast that summer, like hundreds of prosperous Wall Street  men. My winnings were not quite enough to offset both my losses and my living  expenses.

I didn't keep on trading the way I did through stubbornness. I simply wasn't able to state  my own problem to myself, and, of course, it was utterly hopeless to try to solve it. I  harp on this topic so much to show what I had to go through before I got to where I  could really make money. My old shotgun and BB shot could not do the work of a high

power repeating rifle against big game.

Early that fall I not only was cleaned out again but I was so sick of the game I could no  longer beat that I decided to leave New York and try something else some other place. I  had been trading since my fourteenth year. I had made my first thousand dollars when I  was a kid of fifteen, and my first *en thousand before I was twenty-one. I had made and  lost a ten-thousand-dollar stake more than once. In New York I had made thousands and  lost them. I got up to fifty thousand dollars and two days later that went. I had no other  business and knew no other game. After several years I was back where I began. No

worse, for I had acquired habits and a style of living that required money; though that  part didn't bother me as much as being wrong so consistently.

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Reminiscences of a Stock Operator

Chapter IV

Well, I went home. But the moment I was back I knew that I had but one mission in life  and that was to get a stake and go back to Wall Street. That was the only place in the  country where I could trade heavily. Some day, when my game was all right, I'd need  such a place. When a man is right he wants to get all that is coming to him for being  right.

I didn't have much hope, but, of course, I tried to get into the bucket shops again. There  were fewer of them and some of them were run by strangers. Those who remembered  me wouldn't give me a chance to show them whether I had gone back as a trader or not. I  told them the truth, that I had lost in New York whatever I had made at home; that I

didn't know as much as I used to think I did; and that there was no reason why it should  not now be good business for them to let me trade with them. But they wouldn't. And the new places were unreliable. Their owners thought twenty shares was as much as a  gentleman ought to buy if he had any reason to suspect he was going to guess right.

I needed the money and the bigger shops were taking in plenty of it from their regular customers. I got a friend of mine to go into a certain office and trade. I just sauntered in to look them over. I again tried to coax the order clerk to accept a small order, even if it  was only fifty shares. Of course he said no. I had rigged up a code with this friend so  that he would buy or sell when and what I told him. But that only made me chicken feed.  Then the office began to grumble about taking my friend's orders. Finally one day he tried to sell a hundred St. Paul and they shut down on him.

We learned afterward that one of the customers saw us talking together outside and went  in and told the office, and when my friend went up to the order clerk to sell that hundred  St. Paul the guy said:

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Reminiscences of a Stock Operator

"We're not taking any selling orders in St. Paul, not from you."

"Why, what's the matter, Joe?" asked my friend.

"Nothing doing, that's all," answered Joe.

"Isn't that money any good? Look it over. It's all there." And my friend passed over the  hundred my hundred in tens. He tried to look indignant and I was looking unconcerned;  but most of the other customers were getting close to the combatants, as they always did  when there was loud talking or the slightest semblance of a scrap between the shop and  any customer. They wanted to get a line on the merits of the case in order to get a line on  the solvency of the concern.

The clerk, Joe, who was a sort of assistant manager, came out from behind his cage,  walked up to my friend, looked at him and then looked at me.

"It's funny," he said slowly "it's damned funny that you never do a single thing here when your friend Livingston isn't around. You just sit and look at the board by the hour.  Never a peep. But after he comes in you get busy all of a sudden. Maybe you are acting  for yourself; but not in this office any more. We don't fall for Livingston tipping you  off."

Well, that stopped my board money. But I had made a few hundred more than I had  spent and I wondered how I could" use them, for the need of making enough money to  go back to New York with was more urgent than ever. I felt that I would do better the next time. I had had time to think calmly of some of my foolish plays; and then, one can see the whole better when one sees it from a little distance. The immediate problem was  to make the new stake.

One day I was in a hotel lobby, talking to some fellows I knew, who were pretty steady  traders. Everybody was talking stock market. I made the remark that nobody could beat  the game on account of the rotten execution he got from his brokers, especially when he  traded at the market, as I did.

A fellow piped up and asked me what particular brokers I meant.

I said, "The best in the land," and he asked who might they be. I could see he wasn't going to believe I ever dealt with first-class houses.

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Reminiscences of a Stock Operator

But I said, "I mean, any member of the New York Stock Exchange. It isn't that they are  crooked or careless, but when a man gives an order to buy at the market he never knows  what that stock is going to cost him until he gets a report from the brokers. There are  more moves of one or two points than of ten or fifteen. But the outside trader can't catch

the small rises or drops because of the execution. I'd rather trade in a bucket shop any day in the week, if they'd only let a fellow trade big."

The man who had spoken to me I had never seen before. His name was Roberts. He  seemed very friendly disposed. He took me aside and asked me if I had ever traded in  any of the other exchanges, and I said no. He said he knew some houses that were  members of the Cotton Exchange and the Produce Exchange and the smaller stock  exchanges. These firms were very careful and paid special attention to the execution. He  said that they had confidential connections with the biggest and smartest houses on the New York Stock Exchange and through their personal pull and by guaranteeing a  business of hundreds of thousands of shares a month they got much better service than  an individual customer could get.

"They really cater to the small customer," he said. "They make a specialty of out-of town business and they take just as much pains with a ten-share order as they do with  one for ten thousand. They are very competent and honest."

"Yes. But if they pay the Stock Exchange house the regular eighth commission, where  do they come in?"

"Well, they are supposed to pay the eighth. But you know!" He winked at me.

"Yes," I said. "But the one thing a Stock Exchange firm will not do is to split  commissions. The governors wou'i rather a member committed murder, arson and  bigamy than to do business for outsiders for less than a kosher eighth. The very life of  the Stock Exchange depends upon their not violating that one rule."

He must have seen that I had talked with Stock Exchange people, for he said, "Listen!  Every now and then one of those pious Stock Exchange houses is suspended for a year  for violating that rule, isn't it? There are ways and ways of rebating so nobody can  squeal." He probably saw unbelief in my face, for he went on: "And besides, on certain  kind of business we I mean, these wire houses charge a thirty-second extra, in addition  to the eighth commission. They are very nice about it. They never charge the extra

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Reminiscences of a Stock Operator

commission except in unusual cases, and then only if the customer has an inactive  account. It wouldn't pay them, you know, otherwise. They aren't in business exclusively  for their health."

By that time I knew he was touting for some phony brokers.

"Do you know any reliable house of that kind?" I asked him.

"I know the biggest brokerage firm in the United States," he said. "I trade there myself.  They have branches in seventy-eight cities in the United States and Canada. They do an enormous business. And they couldn't very well do it year in and year out if they weren't  strictly on the level, could they?"

"Certainly not," I agreed. "Do they trade in the same stocks that are dealt in on the New  York Stock Exchange?"

"Of course; and on the curb and on any other exchange in this country, or Europe. They  deal in wheat, cotton, provisions ; anything you want. They have correspondents  everywhere and memberships in all the exchanges, either in their own name or on the  quiet."

I knew by that time, but I thought I'd lead him on.

"Yes," I said, "but that does not alter the fact that the orders have to be executed by  somebody, and nobody living can guarantee how the market will be or how close the  ticker's prices are to the actual prices on the floor of the Exchange. By the time a man  gets the quotation here and he hands in an order and it's telegraphed to New York, some  valuable time has gone. I might better go back to New York and lose my money there in  respectable company."

"I don't know anything about losing money; our customers don't acquire that habit. They  make money. We take care of that."

"Your customers?"

"Well, 1 take an interest in the firm, and if I can turn some business their way I do so  because they've always treated me white and I've made a good deal of money through  them. If you wish I'll introduce you to the manager."

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Reminiscences of a Stock Operator

"What's the name of the firm?" I asked him.

He told me. I had heard about them. They ran ads in all the papers, calling attention to the great profits made by those customers who followed their inside information on  active stocks. That was the firm's great specialty. They were not a regular bucket shop,  but bucketeers, alleged brokers who bucketed their orders but nevertheless went through  an elaborate camouflage to convince the world that they were regular brokers engaged in  a legitimate business. They were one of the oldest of that class of firms.

They were the prototype at that time of the same sort of brokers that went broke this  year by the dozen. The general principles and methods were the same, though the particular devices for fleecing the public differed somewhat, certain details having been changed when the old tricks became too well known.

These people used to send out tips to buy or sell a certain stock hundreds of telegrams  advising the instant purchase of a certain stock and hundreds recommending other  customers to sell the same stock, on the old racing-tipster plan. Then orders to buy and  sell would come in. The firm would buy and sell, say, a thousand of that stock through a

reputable Stock Exchange firm and get a regular report on it. This report they would  show to any doubting Thomas who was impolite enough to speak about bucketing  customers' orders.

They also used to form discretionary pools in the office and as a great favor allowed  their customers to authorize them, in writing, to trade with the customer's money and in  the customer's name, as they in their judgment deemed best. That way the most  cantankerous customer had no legal redress when his money disappeared. They'd bull a  stock, on paper, and put the customers in and then they'd execute one of the old

fashioned bucket-shop drives and wipe out hundreds of shoestring margins. They did not spare anyone, women, schoolteachers and old men being their best bet.

"I'm sore on all brokers," I told the tout. "I'll have to think this over," and I left him so he  wouldn't talk any more to me.

I inquired about this firm. I learned that they had hundreds of customers and although  there were the usual stories I did not find any case of a customer not getting his money  from them if he won any. The difficulty was in finding anybody who had ever won in  that office; but I did. Things seemed to be going their way just then, and that meant that

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Reminiscences of a Stock Operator

they probably would not welsh if a trade went against them. Of course most concerns of  that kind eventually go broke. There are times when there are regular epidemics of  bucketeering bankruptcies, like the old-fashioned runs on several banks after one of  them goes up. The customers of the others get frightened and they run to take their  money out. But there are plenty of retired bucket-shop keepers in this country.

Well, I heard nothing alarming about the tout's firm except that they were on the make,  first, last and all the time, and that they were not always truthful. Their specialty was  trimming suckers who wanted to get rich quick. But they always asked their customers' permission, in writing, to take their rolls away from them.

One chap I met did tell me a story about seeing six hundred telegrams go out one day  advising customers to get aboard a certain stock and six "hundred telegrams to other  customers strongly urging them to sell that same stock, at once.

"Yes, I know the trick," I said to the chap who was telling me.

"Yes," he said. "But the next day they sent telegrams to the same people advising them  to close out their interest in everything and buy or sell another stock. I asked the senior  partner, who was in the office, 'Why do you do that? The first part I understand. Some of  your customers are bound to make money on paper for a while, even if they and the

others eventually lose. But by sending out telegrams like this you simply kill them all.  What's the big idea?''

"Well, he said, the customers are bound to lose their money anyhow, no matter what  they buy, or how or where or when. When they lose their money I lose the customers.  Well, I might as well get as much of their money as I can and then look for a new crop.''

Well, I admit frankly that I wasn't concerned with the business ethics of the firm. I told  you I felt sore on the Teller concern and how it tickled me to get even with them. But I  didn't have any such feeling about this firm. They might be crooks or they might not be  as black as they were painted. I did not propose to let them do any trading for me, or  follow their tips or believe their lies. My one concern was with getting together a stake  and returning to New York to trade in fair amounts in an office where you did not have  to be afraid the police would raid the joint, as they did the bucket shops, or see the postal authorities swoop down and tie up your money so that you'd be lucky to get eight cents  on the dollar a year and a half later.

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Reminiscences of a Stock Operator

Anyhow, I made up my mind that I would see what trading advantages of this firm  offered over what you might call the legitimate brokers. I didn't have much money to put  up as margin, and firms that bucketed orders were naturally much more liberal in that respect, so that a few hundred dollars went much further in their offices.

I went down to their place and had a talk with the manager himself. When he found out  that I was an old trader and had formerly had accounts in New York with Stock  Exchange houses and that I had lost all I took with me he stopped promising to make a  million a minute for me if I let them invest my savings. He figured that I was a

permanent sucker, the ticker-hound kind that always plays and always loses; a steady income provider for brokers, whether they were the kind that bucket your orders or  modestly content themselves with the commissions.

I just told the manager that what I was looking for was decent execution, because I always traded at the market and I didn't want to get reports that showed a difference of a  half or a whole point from the ticker price.

He assured me on his word of honor that they would do whatever I thought was right.  They wanted my business because they wanted to show me what high-class brokering  was. They had in their employ the best talent in the business. In fact, they were famous  for their execution. If there was any difference between the ticker price and the report it  was always in favor of the customer, though of course they didn't guarantee that. If I  opened an account with them I could buy and sell at the price which came over the wire,  they were so confident of their brokers.

Naturally that meant that I could trade there to all intents and purposes as though I were  in a bucket shop that is, they'd let me trade at the next quotation. I didn't want to appear  too anxious, so I shook my head and told him I guessed I wouldn't open an account that day, but I'd let him know. He urged me strongly to begin right away as it was a good  market to make money in. It was for them; a dull market with prices seesawing slightly,  just the kind to get customers in and then wipe them out with a sharp drive in the tipped  stock. I had some trouble in getting away.

I had given him my name and address, and that very same day I began to get prepaid  telegrams and letters urging me to get aboard of some stock or other in which they said  they knew an inside pool was operating for a fifty-point rise.

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Reminiscences of a Stock Operator

I was busy going around and finding out all I could about several other brokerage concerns of the same bucketing kind. It seemed to me that if I could be sure of getting  my winnings out of their clutches the only way of my getting together some real money  was to trade in these near bucket-shops.

When I had learned all I could I opened accounts with three firms. I had taken a small  office and had direct wires run to the three brokers.

I traded in a small way so they wouldn't get frightened off at the very start. I made  money on balance and they were not slow in telling me that they expected real business  from customers who had direct wires to their offices. They did not hanker for pikers. They figured that the more I did the more I'd lose, and the more quickly I was wiped out the more they'd make. It was a sound enough theory when you consider that these  people necessarily dealt with averages and the average customer was never long-lived, financially speaking. A busted customer can't trade. A half-crippled customer can whine  and insinuate things and make trouble of one or another kind that hurts business.

I also established a connection with a local firm that had a direct wire to its New York correspondent, who were also members of the New York Stock Exchange. I had a stock  ticker put in and I began to trade conservatively. As I told you, it was pretty much like  trading in bucket shops, only it was a little slower.

It was a game that I could beat, and I did. I never got it down to such a fine point that I  could win ten times out of ten; but I won on balance, taking it week in and week out. I  was again living pretty well, but always saving something, to increase the stake that I was to take back to Wall Street. I got a couple of wires into two more of these bucketing  brokerage houses, making five in all and, of course, my good firm.

There were times when my plans went wrong and my stocks did not run true to form,  but did the opposite of what they should have done if they had kept up their regard for  precedent. But they did not hit me very hard they couldn't, with my shoestring margins.  My relations with my brokers were friendly enough. Their accounts and records did not  always agree with mine, and the differences uniformly happened to be against me.

Curious coincidence not! But I fought for my own and usually had my way in the end.  They always had the hope of getting away from me what I had taken from them. They  regarded my winnings as temporary loans, I think.

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Reminiscences of a Stock Operator

They really were not sporty, being in the business to make money by hook or by crook  instead of being content with the house percentage. Since suckers always lose money  when they gamble in stocks they never really speculate you'd think these fellows would  run what you might call a legitimate illegitimate business. But they didn't. "Copper your  customers and grow rich" is an old and true adage, but they did not seem ever to have

heard of it and didn't stop at plain bucketing., Several times they tried to double-cross  me with the old tricks. They caught me a couple of times because I wasn't looking. They  always did that when I had taken no more than my usual line. I accused them of being  short sports or worse, but they denied it and it ended by -my going back to trading as  usual. The beauty of doing business with a crook is that he always forgives you for  catching-him, so long as you don't stop doing business with him. It's all right as far as he  is concerned. He is willing to meet you more than halfway. Magnanimous souls!

Well, I made up my mind that I couldn't afford to have the normal rate of increase of my stake impaired by crooks' tricks, so I decided to teach them a lesson. I picked out some  stock that after having been a speculative favorite had become inactive. Water-logged. If  I had taken one that never had been active they would have suspected my play. I gave  out buying orders on this stock to my five bucketeering brokers. When the orders were taken and they were waiting for the next quotation to come out on the tape I sent in an  order through my Stock Exchange house to sell a hundred shares of that particular stock  at the market. I urgently asked for quick action. Well, you can imagine what happened  when the selling order got to the floor of the Exchange; a dull inactive stock that a  commission house with out-of-town connections wanted to sell in a hurry. Somebody  got cheap stock. But the transaction as it would be printed on the tape was the price that  I would pay on my five buying orders. I was long on balance four hundred shares of that  stock at a low figure. The wire house asked me what I'd heard, and I said I had a tip on  it. Just before the close of the market I sent an order to my reputable house to buy back  that hundred shares, and not waste any time; that I didn't want to be short under any  circumstances; and I didn't care what they paid. So they wired to New York and the  order to buy that hundred quick resulted in a sharp advance. I of course had put in  selling orders for the five hundred shares that my friends had bucketed. It worked very  satisfactorily.

Still, they didn't mend their ways, and so I worked that trick on them several times. I did not dare punish them as severely as they deserved, seldom more than a point or two on a  hundred shares. But it helped to swell my little hoard that I was saving for my next Wall

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Street venture. I sometimes varied the process by selling some stock short, without overdoing it. I was satisfied with my six or eight hundred clear for each crack.

One day the stunt worked so well that it went far beyond all calculations for a ten-point  swing. I wasn't looking for it. As a matter of fact it so happened that I had two hundred  shares instead of my usual hundred at one broker's, though only a hundred in the four  other shops. That was too much of a good thing for them. They were sore as pups about

it and they began to say things over the wires. So I went and saw the manager, the same  man who had been so anxious to get my account, and so forgiving every time I caught  him trying to put something over on me. He talked pretty big for a man in his position.

"That was a fictitious market for that stock, and we won't pay you a damned cent!" he swore.

"It wasn't a fictitious market when you accepted my order to buy. You let me in then, all right, and now you've got to let me out. You can't get around that for fairness, can you?"

"Yes, I can!" he yelled. "I can prove that somebody put up a job."

"Who put up a job?" I asked.


"Who did they put it up on?" I asked.

"Some friends of yours were in it as sure as pop," he said.

But I told him, "You know very well that I play a lone hand. Everybody in this town  knows that. They've known it ever since I started trading in stocks. Now I want to give  you some friendly advice: you just send and get that money for me. I don't want to be disagreeable. Just do what I tell you."

"I won't pay it. It was a rigged-up transaction," he yelled.

I got tired of his talk. So I told him: "You'll pay it to me right now and here."

Well, he blustered a little more and accused me flatly of being the guilty thimblerigger;  but he finally forked over the cash. The others were not so rambunctious. In one office

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the manager had been studying these inactive-stock plays of mine and when he got my order he actually bought the stock for me and then some for himself in the Little Board,  and he made some money. These fellows didn't mind being sued by customers on  charges of fraud, as they generally had a good technical legal defense ready. But they were afraid I'd attach the furniture the money in the bank I couldn't because they took  care not to have any funds exposed to that danger. It would not hurt them to be known as  pretty sharp, but to get a reputation for welshing was fatal. For a customer to lose money  at his broker's is no rare event. But for a customer to make money and then not get it is  the worst crime on the speculators' statute books.

I got my money from all; but that ten-point jump put an end to the pleasing pastime of  skinning skinners. They were on the lookout for the little trick that they themselves had  used to defraud hundreds of poor customers. I went back to my regular trading; but the  market wasn't always right for my system that is, limited as I was by the size of the

orders they would take, I couldn't make a killing.

I had been at it over a year, during which I used every device that I could think of to  make money trading in those wire houses. I had lived very comfortably, bought an  automobile and didn't limit myself about my expenses. I had to make a stake, but I also  had to live while I was doing it. If my position on the market was right I couldn't spend  as much as I made, so that I'd always be saving some. If I was wrong I didn't make any  money and therefore couldn't spend. As I said, I had saved up a fair-sized roll, and there  wasn't so much money to be made in the five wire houses; so I decided to return to New  York.

I had my own automobile and I invited a friend of mine who also was a trader to motor  to New York with me. He accepted and we started. We stopped at New Haven for  dinner. At the hotel I met an old trading acquaintance, and among other things he told  me there was a shop in town that had a wire and was doing a pretty good business.

We left the hotel on our way to New York, but I drove by the street where the bucket  shop was to see what the outside looked like. We found it and couldn't resist the  temptation to stop and have a look at the inside. It wasn't very sumptuous, but the old  blackboard was there, and the customers, and the game was on.

The manager was a chap who looked as if he had been an actor or a stump speaker. He  was very impressive. He'd say good morning as though he had discovered the morning's

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goodness after ten years of searching for it with a microscope and was making you a present of the discovery as well as of the sky, the sun and the firm's bank roll. He saw us  come up in the sporty-looking automobile, and as both of us were young and careless I  don't suppose I looked twenty he naturally concluded we were a couple of Yale boys. I  didn't tell him we weren't. He didn't give me a chance, but began delivering a speech. He  was very glad to see us. Would we have a comfortable seat? The market, we would find,  was philanthropically inclined that morning; in fact, clamoring to increase the supply of  collegiate pocket money, of which no intelligent undergraduate ever had a sufficiency

since the dawn of historic time. But here and now, by the beneficence of the ticker, a  small initial investment would return thousands. More pocket money than anybody  could spend was what the stock market yearned to yield.

Well, I thought it would be a pity not to do as the nice man of the bucket shop was so  anxious to have us do, so I told him I would do as he wished, because I had heard that  lots of people made lots of money in the stock market.

I began to trade, very conservatively, but increasing the line as I won. My friend followed me.

We stayed overnight in New Haven and the next morning found us at the hospitable  shop at five minutes to ten. The orator was glad to see us, thinking his turn would cony  day. But I cleaned up within a few dollars of fifteen hundred. The next morning when  we dropped in on the great orator, and handed him an order to sell five hundred Sugar he  hesitated, but finally accepted it in silence! The stock broke over a point and I closed out  and gave him the ticket. There was exactly five hundred dollars coming to me in profits,  and my five hundred dollar margin. He took twenty fifties from the safe, counted them  three times very slowly, then he counted them again in front of me. It looked as if his  fingers were sweating mucilage the way the notes seemed to stick to him, but finally he handed the money to me. He folded his arms, bit his lower lip, kept it bit, and stared at

the top of a window behind me.

I told him I'd like to sell two hundred Steel. But he never stirred. He didn't hear me. I  repeated my wish, only I made it three hundred shares. He turned his head. I waited for  the speech. But all he did was to look at me. Then he smacked his lips and swallowed as  if he was going to start an attack on fifty years of political misrule by the unspeakable

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grafters of the opposition.

Finally he waved his hand toward the yellow-backs in my hand and said, "Take away that bauble!"

"Take away what?" I said. I hadn't quite understood what he was driving at.  "Where are you going, student?" He spoke very impressively.

"New York," I told him.

"That's right," he said, nodding about twenty times. "That is ex-actly right. You are  going away from here all right, because now I know two things two, student! I know what you are not, and I know what you are. Yes! Yes! Yes!"

"Is that so?" I said very politely.

"Yes. You two " He paused; and then he stopped being in Congress and snarled: "You  two are the biggest sharks in the United States of America! Students? Ye-eh! You must be Freshmen! Ye-eh!"

We left him talking to himself. He probably didn't mind the money so much. No  professional gambler does. It's all in the game and the luck's bound to turn. It was his  being fooled in us that hurt his pride.

That is how I came back to Wall Street for a third attempt. I had been studying, of  course, trying to locate the exact trouble with my system that had been responsible for  my defeats in A. R. Fullerton & Co.'s office. I was twenty when I made my first ten  thousand, and I lost that. But I knew how and why because I traded out of season all the  time; because when I couldn't play according to my system, which was based on study  and experience, I went in and gambled. I hoped to win, instead of knowing that I ought  to win on form. When I was about twenty-two I ran up my stake to fifty thousand  dollars; I lost it on May ninth. But I knew exactly why and how. It was the laggard tape  and the unprecedented violence of the movements that awful day. But I didn't know why  I had lost after my return from St. Louis or after the May ninth panic. I had theories that  is, remedies for some of the faults that I thought I found in my play. But I needed actual  practice.

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There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what  to do in order to win. Did you get that? You begin to learn!

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Chapter V

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.

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.

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

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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.

"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 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.

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.

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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.

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.

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.

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.

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

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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.

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 "tightness" entitled me to. Why wasn't I?

There was as much to learn from 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.

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.

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:

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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.

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.

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 customer would finish the tale of his perplexity and then ask: "What do you think I   - 51 -

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ought to 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!"

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.

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.

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."

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.

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

From his voice and manner you would have conservatively estimated it at ten thousand  shares. But Mr. Partridge shook his head regretfully and whined, "No! No! I can't do  that!"

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"What?" yelled Elmer.

"I simply can't!" said Mr. Partridge. He was in great trouble.

"Didn't I give you the tip to buy it?"

"You did, Mr. Harwood, and I am very grateful to you. Indeed, I am, sir. But "  "Hold on! Let me talk! And didn't that stock go op 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."

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

"No, I couldn't."

"Why not?" And Elmer drew nearer.

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

"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?"

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 1"

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 beg your pardon, Mr. Harwood; I didn't say I'd lose my job," cut in old Turkey. "I said   - 53 -

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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.

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   - 54 -

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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.

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

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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.

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!

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Chapter VI

In the spring of 1906 I was in Atlantic City for a short vacation. I was out of stocks and  was thinking only of having a change of air and a nice rest. By the way, I had gone back  to my first brokers, Harding Brothers, and my account had got to be pretty active. I  could swing three or four thousand shares. That wasn't much more than I had done in the  old Cosmopolitan shop when I was barely twenty years of age. But there was some

difference between my one-point margin in the bucket shop and the margin required by  brokers who actually bought or sold stocks for my account on the New York Stock  Exchange.

You may remember the story I told you about that time when I was short thirty-five  hundred Sugar in the Cosmopolitan and I had a hunch something was wrong and I'd  better close the trade? Well, I have often had that curious feeling. As a rule, I yield to it.  But at times I have pooh-poohed the idea and have told myself that it was simply asinine

to follow any of these sudden blind impulses to reverse my position. I have ascribed my  hunch to a state of nerves resulting from too many cigars or insufficient sleep or a torpid liver or something of that kind. When I have argued myself into disregarding my impulse and have stood pat I have always had cause to regret it. A dozen instances occur  to me when I did not sell as per hunch, and the next day I'd go downtown and the market  would be strong, or perhaps even advance, and I'd tell myself how silly it would have  been to obey the blind impulse to sell. But on the following day there would be a pretty  bad drop. Something had broken loose somewhere and I'd have made money by not  being so wise and logical. The reason plainly was not physiological but psychological.

I want to tell you only about one of them because of what it did for me. It happened  when I was having that little vacation in Atlantic City in the spring of 1906. I had a  friend with me who also was a customer of Harding Brothers. I had no interest in the  market one way or another and was enjoying my rest. I can always give up trading to

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play, unless of course it is an exceptionally active market in which my commitments are  rather heavy. It was a bull market, as I remember it. The outlook was favorable for  general business and the stock market had slowed down but the tone was firm and all  indications pointed to higher prices.

One morning after we had breakfasted and had finished reading all the New York  morning papers, and had got tired of watching the sea gulls picking up clams and flying  up with them twenty feet in the air and dropping them on the hard wet sand to open them for their breakfast, my friend and I started up the Boardwalk. That was the most exciting  thing we did in the daytime.

It was not noon yet, and we walked up slowly to kill time and breathe the salt air.  Harding Brothers had a branch office on the Boardwalk and we used to drop in every  morning and see how they'd opened. It was more force of habit than anything else, for I  wasn't doing anything.

The market, we found, was strong and active. My friend, who was quite bullish, was  carrying a moderate line purchased several points lower. He began to tell me what an obviously wise thing it was to hold stocks for much higher prices. I wasn't paying  enough attention to him to take the trouble to agree with him. I was looking over the quotation board, noting the changes they were mostly advances until I came to Union  Pacific. I got a feeling that I ought to sell it. I can't tell you more. I just felt like selling it.  I asked myself why I should feel like that, and I couldn't find any reason whatever for  going short of UP.

I stared at the last price on the board until I couldn't see any figures or any board or  anything else, for that

matter. All I knew was that I wanted to sell Union Pacific and I couldn't find out why I  wanted to. I must have looked queer, for my friend, who was standing alongside of me,  suddenly nudged me and asked, "Hey, what's the matter?"

"I don't know," I answered.

"Going to sleep?" he said.

"No," I said. "I am not going to sleep. What I am going to do is to sell that stock." I had   - 58 -

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always made money following my hunches. I walked over to a table where there were  some blank order pads. My friend followed me. I wrote out an order to sell a thousand  Union Pacific at the market and handed it to the manager. He was smiling when I wrote  it and when he took it. But when he read the order he stopped smiling and looked at me.

"Is this right?" he asked me. But I just looked at him and he rushed it over to the operator. "What are you doing?" asked my friend.

"I'm selling it!" I told him.

"Selling what?" he yelled at me. If he was a bull how could I be a bear? Something was  wrong.

"A thousand UP," I said.

"Why?" he asked me in great excitement.

I shook my head, meaning I had no reason. But he must have thought I'd got a tip,  because he took me by the arm and led me outside into the hall, where we could be out  of sight and hearing of the other customers and rubbering chair-warmers.

"What did you hear?" he asked me. He was quite excited. UP. was one of his pets and he  was bullish on it because of its earnings and its prospects. But he was willing to take a  bear tip on it at second hand. "Nothing!" I said.

"You didn't?" He was skeptical and showed it plainly.

"I didn't hear a thing."

"Then why in blazes are you selling?"

"I don't know," I told him. I spoke gospel truth.

"Oh, come across, Larry," he said.

He knew it was my habit to know why I traded. I had sold a thousand shares of Union  Pacific. I must have a very good reason to sell that much stock in the face of the strong  market.

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"I don't know," I repeated. "I just feel that something is going to happen."  "What's going to happen?"

"I don't know. I can't give you any reason. All I know is that I want to sell that stock.  And I'm going to let 'em have another thousand."

I walked back into the office and gave an order to sell a second thousand. If I was right  in selling the first thousand I ought to have out a little more.

"What could possibly happen?" persisted my friend, who couldn't make up his mind to  follow my lead. If I'd told him that I had heard UP. was going down he'd have sold it  without asking me from whom I'd heard it or why. "What could possibly happen?" he  asked again.

"A million things could happen. But I can't promise you that any of them will. I can't give you any reasons and I can't tell fortunes," I told him.

"Then you're crazy," he said. "Stark crazy, selling that stock without rime or reason. You  don't know why you want to sell it?"

"I don't know why I want to sell it. I only know I do want to," I said. "I want to, like  everything." The urge was so strong that I sold another thousand.

That was too much for my friend. He grabbed me by the arm and said, "Here! Let's get  out of this place before you sell the entire capital stock."

I had sold as much as I needed to satisfy my feeling, so I followed him without waiting  for a report on the last two thousand shares. It was a pretty good jag of stock for me to  sell even with the best of reasons. It seemed more than enough to be short of without any  reason whatever, particularly when the entire market was so strong and there was  nothing in sight to make anybody think of the bear side. But I remembered that on  previous occasions when I had the same urge to sell and didn't do it I always had reasons  to regret it.

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I have told some of these stories to friends, and some of million. And Jim Fisk just looked at him and said, "Go ahead! Do! Sell it short and invite me to your funeral.' "

"Yes," I said; "and if that chap had sold it short, look at the killing he would have made!  Sell some UP. yourself."

"Not I! I'm the kind that thrives best on not rowing against wind and tide."

On the following day, when fuller reports came in, the market began to slide off, but  even then not as violently as it should. Knowing that nothing under the sun could stave  off a substantial break I doubled up and sold five thousand shares. Oh, by that time it  was plain to most people, and my brokers were willing enough. It wasn't reckless of  them or of me, not the way I sized up the market. On the day following, the market  began to go for fair. There was the dickens to pay. Of course I pushed my luck for all it  was worth. I doubled up again and sold ten thousand shares more. It was the only play  possible.

I wasn't thinking of anything except that I was right 100 per cent right and that this was  a heaven-sent opportunity. It was up to me to take advantage of it. I sold more. Did I  think that with such a big line of shorts out, it wouldn't take much of a rally to wipe out my paper profits and possibly my principal? I don't know whether I thought of that or  not, but if I did it didn't carry much weight with me. I wasn't plunging recklessly. I was  really playing conservatively. There was nothing that anybody could do to undo the  earthquake, was there? They couldn't restore the crumpled buildings overnight, free,  gratis, for nothing, could they? AH the money in the world couldn't help much in the

next few hours, could it?

I was not betting blindly. I wasn't a crazy bear. I wasn't drunk with success or thinking  that because Frisco was pretty well wiped off the map the entire country was headed for  the scrap heap. No, indeed! I didn't look for a panic. Well, the next day I cleaned up. I  made two hundred and fifty thousand dollars. It was my biggest winnings up to that  time. It was all made in a few days. The Street paid no attention to the earthquake the

first day or two. They'll tell you that it was because the first despatches were not so  alarming, but I think it was because it took so long to change the point of view of the public toward the securities markets. Even the professional traders for the most part  were slow and shortsighted.

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I have no explanation to give you, either scientific or childish. I am telling you what I  did, and why, and what came of it. I was much less concerned with the mystery of the  hunch than with the fact that I got a quarter of a million out of it. It meant that I could  now swing a much bigger line than ever, if or when the time came for it.

That summer I went to Saratoga Springs. It was supposed to be a vacation for me, but I  kept an eye on the market. To begin with, I wasn't so tired that it bothered me to think  about it. And then, everybody I knew up there had or had had an active interest in it. We  naturally talked about it. I have noticed that there is quite a difference between talking  and trading. Some of these chaps remind you of the bold clerk who talks to his  cantankerous employer as to a yellow dog when he tells you about it.

Harding Brothers had a branch office in Saratoga. Many of their customers were there.  But the real reason, I suppose, was the advertising value. Having a branch office in a  resort is simply high-class billboard advertising. I used to drop in and sit around with the  rest of the crowd. The manager was a very nice chap from the New York office who was  there to give the glad hand to friends and strangers and, if possible, to get business. It was a wonderful place for tips all kinds of tips, horse-race, stock-market, and waiters'.  The office knew I didn't take any, so the manager didn't come and whisper confidentially  in my ear what he'd just got on the q. t. from the New York office. He simply passed  over the telegrams, saying, "This is what they're sending out," or something of the kind.

Of course I watched the market. With me, to look at the quotation board and to read the  signs is one process. My good friend Union Pacific, I noticed, looked like going up. The  price was high, but the stock acted as if it were being accumulated. I watched it a couple  of days without trading in it, and the more I watched it the more convinced I became that  it was being bought on balance by somebody who was no piker, somebody who not only  had a big bank roll but knew what was what. Very clever accumulation, I thought.

As soon as I was sure of this I naturally began to buy it, at about 160. It kept on acting  all hunky, and so I kept on buying it, five hundred shares at a clip. The more I bought the stronger it got, without any spurt, and I was feeling very comfortable. I couldn't see any reason why that stock shouldn't go up a great deal more; not with what I read on the  tape.

All of a sudden the manager came to me and said they'd got a message from New York they had a direct wire of course asking if I was in the office, and when they answered

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yes, another came saying: "Keep him there. Tell him Mr. Harding wants to speak to him."

I said I'd wait, and bought five hundred shares more of UP. I couldn't imagine what  Harding could have to say to me. I didn't think it was anything about business. My  margin was more than ample for what I was buying. Pretty soon the manager came and  told me that Mr. Ed Harding wanted me on the long-distance telephone.

"Hello, Ed," I said.

But he said, "What the devil's the matter with you? Are you crazy?"  "Are you?" I said.

"What are you doing?" he asked.

"What do you mean?"

"Buying all that stock."

"Why, isn't my margin all right?"

"It isn't a case of margin, but of being a plain sucker."

"I don't get you."

"Why are you buying all that Union Pacific?"

"It's going up," I said.

"Going up, hell! Don't you know that the insiders are feeding it out to you? You're just about the easiest mark up there. You'd have more fun losing it on the ponies. Don't let them kid you."

"Nobody is kidding me," I told him. "I haven't talked to a soul about it."

But he came back at me: "You can't expect a miracle to save you every time you plunge  in that stock. Get out while you've still got a chance," he said. "It's a crime to be long of  that stock at this level when these highbinders are shoveling it out by the ton."

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"The tape says they're buying it," I insisted.

"Larry, I got heart disease when your orders began to come in. For the love of Mike, don't be a sucker. Get out! Right away. It's liable to bust wide open any minute. I've  done my duty. Good-by!" And he hung up.

Ed Harding was a very clever chap, unusually well-informed and a real friend,  disinterested and kindhearted. And what was even more, I knew he was in position to  hear things. All I had to go by, in my purchases of UP., was my years of studying the behaviour of stocks and my perception of certain symptoms which experience had  taught me usually accompanied a substantial rise. I don't know what happened to me,  but I suppose I must have concluded that my tape reading told me the stock was being  absorbed simply because very clever manipulation by the insiders made the tape tell a story that wasn't true. Possibly I was impressed by the pains Ed Harding took to stop me from making what he was so sure would be a colossal mistake on my part. Neither his brains nor his motives were to be questioned. Whatever it was that made me decide to  follow his advice, I cannot tell you; but follow it, I did.

I sold out all my Union Pacific. Of course if it was unwise to be long of it it was equally  unwise not to be short of it. So after I got rid of my long stock I sold four thousand  shares short. I put out most of it around 162.

The next day the directors of the Union Pacific Company declared a 10 per cent  dividend on the stock. At first nobody in Wall Street believed it. It was too much like the desperate maneuver of cornered gamblers. All the newspapers jumped on the directors.  But while the Wall Street talent hesitated to act the market boiled over. Union Pacific  led, and on huge transactions made a new high-record price. Some of the room traders  made fortunes in an hour and I remember later hearing about a rather dull-witted  specialist who made a mistake that put three hundred and fifty thousand dollars in his  pocket. He sold his seat the following week and became a gentleman farmer the  following month.

Of course I realised, the moment I heard the news of the declaration of that unprecedented 10 per cent dividend, that I got what I deserved for disregarding the voice  of experience and listening to the voice of a tipster. My own convictions I had set aside  for the suspicions of a friend, simply because he was disinterested and as a rule knew  what he was doing.

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As soon as I saw Union Pacific making new high records I said to myself, "This is no  stock for me to be short of."

All I had in the world was up as margin in Harding's office. I was neither cheered nor  made stubborn by the knowledge of that fact. What was plain was that I had read the  tape accurately and that I had been a ninny to let Ed Harding shake my own resolution. There was no sense in recriminations, because I had no time to lose; and besides, what's  done is done. So I gave an order to take in my shorts. The stock was around 165 when I  sent in that order to buy in the four thousand UP. at the market. I had a three-point loss  on it at that figure. Well, my brokers paid 172 and 174 for some of it before they were through. I found when I got my reports that Ed Harding's kindly intentioned interference cost me forty thousand dollars. A low price for a man to pay for not having the courage  of his own convictions! It was a cheap lesson.

I wasn't worried, because the tape said still higher prices. It was an unusual move and  there were no precedents for the action of the directors, but I did this time what I thought  I ought to do. As soon as I had given the first order to buy four thousand shares to cover  my shorts I decided to profit by what the tape indicated and so I went along. I bought

four thousand shares and held that stock until the next morning. Then I got out. I not  only made up the forty thousand dollars I had lost but about fifteen thousand besides. If  Ed Harding hadn't tried to save me money I'd have made a killing. But he did me a very great service, for it was the lesson of that episode that, I firmly believe, completed my education as a trader.

It was not that all I needed to learn was not to lake tips but follow my own inclination. It  was that I gained confidence in myself and I was able finally to shake off the old method  of trading. That Saratoga experience was my last haphazard, hit-or-miss operation. From  then on I began to think of basic conditions instead of individual stocks. I promoted  myself to a higher grade in the hard school of speculation. It was a long and difficult  step to take.

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Chapter VII

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to  buy or sell any particular stock. In a bear market all stocks go down and in a bull market  they go up. I don't mean of course that in a bear market caused by a war, ammunition  shares do not go up. I speak in a general sense. But the average man doesn't wish to be  told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish  to work. He doesn't even wish to have to think. It is too much bother to have to count the  money that he picks up from the ground.

Well, I wasn't that lazy, but I found it easier to think of individual stocks than of the  general market and therefore of individual fluctuations rather than of general  movements. I had to change and I did.

People don't seem to grasp easily the fundamentals of stock trading. I have often said  that to buy on a rising market is the most comfortable way of buying stocks. Now, the  point is not so much to buy as cheap as possible or go short at top prices, but to buy or  sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower

level than the previous sale. When I am buying, the reverse is true. I must buy on a  rising scale. I don't buy long stock on a scale down, I buy on a scale up.

Let us suppose, for example, that I am buying some stock. I'll buy two thousand shares  at no. If the stock goes up to ill after I buy it I am, at least temporarily, right in my operation, because it is a point higher; it shows me a profit. Well, because I am right I go  in and buy another two thousand shares. If the market is still rising I buy a third lot of  two thousand shares. Say the price goes to 114. I think it is enough for the time being. I  now have a trading basis to work from. I am long six thousand shares at an average of  in%, and the stock is selling at 114. I won't buy any more just then. I wait and see. I

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figure that at some stage of the rise there is going to be a reaction. I want to see how the  market takes care of itself after that reaction. It will probably react to where I got my  third lot. Say that after going higher it falls back to H2J4, and then rallies. Well, just as it  goes back to 113% I shoot an order to buy four thousand at the market of course. Well,  if I get that fouf thousand at 113% I know something is wrong and I'll give a testing  order that is, I'll sell one thousand shares to see how the market takes it. But suppose that  of the order to buy the four thousand shares that I put in when the price was 113^4 I get  two thousand at 114 and five hundred at 114^ and the rest on the way up so that for the  last five hundred I pay 115^. Then I know I am right. It is the way I get the four  thousand shares that tells me whether I am right in buying that particular stock at that  particular time for of course I am working on the assumption that I have checked up  general conditions pretty well and they are bullish. I never want to buy stocks too cheap  or too easily.

I remember a story I heard about Deacon S. V. White when he was one of the big  operators of the Street. He was a very fine old man, clever as they make them, and brave. He did some wonderful things in his day, from all I've heard.

It was in the old days when Sugar was one of the most continuous purveyors of  fireworks in the market.

H. O. Havemeyer, president of the company, was in the heyday of his power. I gather  from talks with the old-timers that H. O. and his following had all the resources of cash  and cleverness necessary to put through successfully any deal in their- own stock. They tell me that Havemeyer trimmed more small professional traders in that stock than any other insider in. any other stock. As a rule, the floor traders are more likely to thwart the  insiders' game than help it.

One day a man who knew Deacon White rushed into the office all excited and said,  "Deacon, you told me if I ever got any good information to come to you at once with it  and if you used it you'd carry me for a few hundred shares." He paused for breath and  for confirmation.

The deacon looked at him in that meditative way he had and said, "I don't know whether  I ever told you exactly that or not, but I am willing to pay for information that I can use."

"Well, I've got it for you."

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"Now, that's nice," said the deacon, so mildly that the man with the info swelled up and said,

"Yes, sir, deacon." Then he came closer so nobody else would hear and said, "H. O.  Havemeyer is buying Sugar."

"Is he?" asked the deacon quite calmly.

It peeved the informant, who said impressively: "Yes, sir. Buying all he can get,  deacon."

"My friend, are you sure?" asked old S. V.

"Deacon, I know it for a positive fact. The old inside gang are buying all they can lay  their hands on. It's got something to do with the tariff and there's going to be a killing in  the common. It will cross the preferred. And that means a sure thirty points for a starter."

"Do you really think so?" And the old man looked at him over the top of the old fashioned silver-rimmed spectacles that he had put on to look at the tape.

"Do I think so? No, I don't think so; I know so. Absolutely! Why, deacon, when H. O. Havemeyer and his friends buy Sugar as they're doing now they're never satisfied with  anything less than forty points net. I shouldn't be surprised to see the market get away  from them any minute and shoot up before they've got their full lines. There ain't as  much of it kicking around the brokers' offices as there was a month ago."

"He's buying Sugar, eh?" repeated the deacon absently.

"Buying it? Why, he's scooping it in as fast as he can without putting up the price on  himself."

"So?" said the deacon. That was all. But it was enough to nettle the tipster, and he said,  "Yes, sir-ree! And I call that very good information. Why, it's absolutely straight."

"Is it?"

"Yes; and it ought to be worth a whole lot. Are you going to use it?"   - 68 -

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"Oh, yes. I'm going to use it."

"When?" asked the information bringer suspiciously.

"Right away." And the deacon called: -"Frank!" It was the first name of his shrewdest  broker, who was then in the adjoining room.

"Yes, sir," said Frank.

"I wish you'd go over to the Board and sell ten thousand Sugar."

"Sell?" yelled the tipster. There was such suffering in his voice that Frank, who had  started out at a run,

halted in his tracks.

"Why, yes," said the deacon mildly.

"But I told you H. O. Havemeyer was buying it!"

"I know you did, my friend," said the deacon calmly; and turning to the broker: "Make  haste, Frank!"

The broker rushed out to execute the order and the tipster turned red.

"I came in here," he said furiously, "with the best information I ever had. I brought it to you because I

thought you were my friend, and square. I expected you to act on it."  "I am acting on it," interrupted the deacon in a tranquillising voice.  "But I told you H. O. and his gang were buying!"

"That's right. I heard you."

"Buying! Buying! I said buying!" shrieked the tipster.

"Yes, buying! That is what I understood you to say," the deacon assured him. He was   - 69 -

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standing by the ticker, looking at the tape.

"But you are selling it."

"Yes; ten thousand shares." And the deacon nodded. "Selling it, of course."

He stopped talking to concentrate on the tape and the tipster approached to see what the deacon saw, for the old man was very foxy. While he was looking over the deacon's shoulder a clerk came in with a slip, obviously the report from Frank. The deacon barely  glanced at it. He had seen on the tape "how his order had been executed.

It made him say to the clerk, "Tell him to sell another ten thousand Sugar."  "Deacon, I swear to you that they really are buying the stock!"

"Did Mr. Havemeyer tell you?" asked the deacon quietly.

"Of course not! He never tells anybody anything. He would not bat an eyelid to help his  best friend make a nickel. But I know this is true."

"Do not allow yourself to become excited, my friend." And the deacon held up a hand.  He was looking at the tape. The tip-bringer said, bitterly:

"If I had known you were going to do the opposite of what I expected I'd never have  wasted your time or mine. But I am not going to feel glad when you cover that stock at  an awful loss. I'm sorry for you, deacon. Honest! If you'll excuse me I'll go elsewhere  and act on my own information."

"I'm acting on it. I think I know a little about the market; not as much, perhaps, as you  and your friend H. O. Havemeyer, but still a little. What I am doing is what my experience tells me is the wise thing to do with the information you brought me. After a  man has been in Wall Street as long as I have he is grateful for anybody who feels sorry  for him. Remain calm, my friend."

The man just stared at the deacon, for whose judgment and nerve he had great respect.

Pretty soon the clerk came in again and handed a report to the deacon, who looked at it  and said: "Now tell him to buy thirty thousand Sugar. Thirty thousand!"

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The clerk hurried away and the tipster just grunted and looked at the old gray fox.

"My friend," the deacon explained kindly, "I did not doubt that you were telling me the  truth as you saw it. But even if I had heard H. O. Havemeyer tell you himself, I still  would have acted as I did. For there was only one way to find out if anybody was buying  the stock in the way you said H. O. Havemeyer and his friends were buying it, and that  was to do what I did. The first ten thousand shares went fairly easily. It was not quite  conclusive. But the second ten thousand was absorbed by a market that did not stop  rising. The way the twenty thousand shares were taken by somebody proved to me that  somebody was in truth willing to take all the stock that was offered. It doesn't  particularly matter at this point who that particular somebody may be. So I have covered  my shorts and am long ten thousand shares, and I think that your information was good  as far as it went."

"And how far does it go?" asked the tipster.

"You have five hundred shares in this office at the average price of the ten thousand  shares," said the deacon. "Good day, my friend. Be calm the next time."

"Say, deacon," said the tipster, "won't you please sell mine when you sell yours? I don't  know as much as I thought I did."

That's the theory. That is why I never buy stocks cheap. Of course I always try to buy  effectively in such a way as to help my side of the market. When it comes to selling stocks, it is plain that nobody can sell unless somebody wants those stocks.

If you operate on a large scale you will have to bear that in mind all the time. A man  studies conditions, plans his operations carefully and proceeds to act. He swings a pretty  fair line and he accumulates a big profit on paper. Well, that man can't sell at will. You can't expect the market to absorb fifty thousand shares of one stock as easily as it does  one hundred. He will have to wait until he has a market there to take it. There comes the  time when he thinks the requisite buying power is there. When that opportunity comes  he must seize it. As a rule he will have been waiting for it. He has to sell when he can,  not when he wants to. To learn the time, he has to watch and test. It is no trick to tell  when the market can take what you give it. But in starting a movement it is unwise to  take on your full line unless you are convinced that conditions are exactly right.  Remember that stocks are never too high for you to begin buying or too low to begin

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selling. But after the initial transaction, don't make a second unless the first shows you a  profit. Wait and watch. That is where your tape reading conies in to enable you to decide  as to the proper time for beginning. Much depends upon beginning at exactly the right time. It took me years to realize the importance of this. It also cost me some hundreds of  thousands of dollars.

I don't mean to be understood as advising persistent pyramiding. A man can pyramid  and make big money that he couldn't make if he didn't pyramid; of course. But what I  meant to say was this: 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!

Suppose he buys his first hundred, and that promptly shows" him a loss. Why should he go to work and get more stock? He ought to see at once that he is in wrong; at least  temporarily.

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Reminiscences of a Stock Operator

Chapter VIII

The Union Pacific incident in Saratoga in the summer of 1906 made me more  independent than ever of tips and talk that is, of the opinions and surmises and  suspicions of other people, however friendly or however able they might be personally.  Events, not vanity, proved for me that I could read the tape more accurately than most of  the people about me. I also was better equipped than the average customer of Harding  Brothers in that I was utterly free from speculative prejudices. 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 as a lad I always got my own meanings out of such facts as I observed. It is the  only way in which the meaning reaches me. I cannot get out of facts what somebody  tells me to get. They are my facts, don't you see? If I believe some thing you can be sure  it is because I simply must. When I am long of stocks it is because my reading of  conditions has made me bullish. But you find many people, reputed to be intelligent,  who are bullish because they have stocks. I do not allow my possessions or my prepossessions either to do any thinking for me. That is why I repeat that I never argue  with the tape. To be angry at the market because it unexpectedly or even illogically goes  against you is like getting mad at your lungs because you have pneumonia.

I had been gradually approaching the full realization of how much more than tape  reading there was to stock speculation. Old man Partridge's insistence on the vital  importance of being continuously bullish in a bull market doubtless made tny mind  dwell on the need above all other things of determining the kind of market a man is  trading in. I began to realize that the big money must necessarily be in the big swing.

Whatever might seem to give a big swing its initial impulse, the fact is that its  continuance is not the result of manipulation by pools or artifice by financiers, but  depends upon basic conditions. And no matter who opposes it, the swing must inevitably

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run as far and as fast and as long as the impelling forces determine.

After Saratoga I began to see more clearly perhaps I should say more maturely that since  the entire list moves in accordance with the main current there was not so much need as I had imagined to study individual plays or the behaviour of this or the other stock. Also,  by thinking of the swing a man was not limited in his trading. He could buy or sell the  entire list. In certain stocks a short line is dangerous after a man sells more than a certain percentage of the capital stock, the amount depending upon how, where and by whom  the stock is held. But he could sell a million shares of the general list if he had the price  without the danger of being squeezed. A great deal of money used to be made periodically by insiders in the old days out of the shorts and their carefully fostered fears  of corners and squeezes.

Obviously the thing to do was to be bullish in a bull market and bearish in a bear market.  Sounds silly, doesn't it? But I had to grasp that general principle firmly before I saw that  to put it into practice really meant to anticipate probabilities. It took me a long time to  learn to trade on those lines. But in justice to myself I must remind you that up to then I  had never had a big enough stake to speculate that way. A big swing will mean big  money if your line is big, and to be able to swing a big line you need a big balance at  your broker's.

I always had or felt that I had to make my daily bread out of the stock market. It  interfered with my efforts to increase the stake available for the more profitable but slower and therefore more immediately expensive method of trading on swings.

But now not only did my confidence in myself grow stronger but my brokers ceased to  think of me as a sporadically lucky Boy Plunger. They had made a great deal out of me  in commissions, but now I was in a fair way to become their star customer and as such  to have a value beyond the actual volume of my trading. A customer who makes money  is an asset to any broker's office.

The moment I ceased to be satisfied with merely studying the tape I ceased to concern myself exclusively with the daily fluctuations in specific stocks, and when that happened  I simply had to study the game from a different angle. I worked back from the quotation  to first principles; from price fluctuations to basic conditions.

Of course I had been reading the daily dope regularly for a long time. All traders do. But   - 74 -

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much of it was gossip, some of it deliberately false, and the rest merely the personal opinion of the writers. The reputable weekly reviews when they touched upon  underlying conditions were not entirely satisfactory to me. The point of view of the  financial editors was not mine as a rule. It was not a vital matter for them to marshal  their facts and draw their conclusions from them, but it was for me. Also there was a  vast difference in our appraisal of the element of time. The analysis of the week that had  passed was less important to me than the forecast of the weeks that were to come.

For years I had been the victim of an unfortunate combination of inexperience, youth  and insufficient capital. But now I felt the elation of a discoverer. My new attitude  toward the game explained my repeated failures to make big money in New York. But now with adequate resources, experience and confidence, I was in such a hurry to try the  new key that I did not notice that there was another lock on the door a time lock! It was  a perfectly natural oversight. I had to pay the usual tuition a good whack per each step  forward.

I studied the situation in 1906 and I thought that the money outlook was particularly  serious. Much actual wealth the world over had been destroyed. Everybody must sooner  or later feel the pinch, and therefore nobody would be in position to help anybody. It  would not be the kind of hard times that comes from the swapping of a house worth ten  thousand dollars for a carload of race horses worth eight thousand dollars. It was the  complete destruction of the house by fire and of most of the horses by a railroad wreck.

It was good hard cash that went up in cannon smoke in the Boer War, and the millions  spent for feeding nonproducing soldiers in South Africa meant no help from British  investors as in the past. Also, the earthquake and the fire in San Francisco and other  disasters touched everybody manufacturers, farmers, merchants, labourers and  millionaires. The railroads must suffer greatly. I figured that nothing could stave off one  peach of a smash. Such being the case there was but one thing to do sell stocks!

I told you I had already observed that my initial transaction, after I made up my mind which way I was going to trade, was apt to show me a profit. And now when I decided  to sell I plunged. Since we undoubtedly were entering upon a genuine bear market I was  sure I should make the biggest killing of my career.

The market went off. Then it came back. It shaded off and then it began to advance  steadily. My paper profits vanished and my paper losses grew. One day it looked as if

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not a bear would be left to tell the tale of the strictly genuine bear market. I couldn't  stand the gaff. I covered. It was just as well. If I hadn't I wouldn't have had enough left  to buy a postal card. I lost most of my fur, but it was better to live to fight another day.

I had made a mistake. But where? I was bearish in a bear market. That was wise. I had  sold stocks short. That was proper. I had sold them too soon. That was costly. My  position was right but my play was wrong. However, every day brought the market  nearer to the inevitable smash. So I waited and when the rally began to falter and pause I  let them have as much stock as my sadly diminished margins permitted. I was right this  time for exactly one whole day, for on the next there was another rally. Another big bite  out of yours truly! So I read the tape and covered and waited. In due course I sold again and again they went down promisingly and then they rudely rallied.

It looked as if the market were doing its best to make me go back to my old and simple  ways of bucket-shop trading. It was the first time I had worked with a definite forward looking plan embracing the entire market instead of one or two stocks. I figured that I  must win if I held out. Of course at that time I had not developed my system of placing  my bets or I would have put out my short line on a declining market, as I explained to  you the last time. I would not then have lost so much of my margin. I would have been  wrong but not hurt. You see, I had observed certain facts but had not learned to co ordinate them. My incomplete observation not only did not help but actually hindered.

I have always found it profitable to study my mistakes. Thus I eventually discovered that  it was all very well not to lose your bear position in a bear market, but that at all times  the tape should be read to determine the propitiousness of the time for operating. If you  begin right you will not see your profitable position seriously menaced; and then you  will find no trouble in sitting tight.

Of course to-day I have greater confidence in the accuracy of my observations in which  neither hopes nor hobbies play any part and also I have greater facilities for verifying  my facts as well as for variously testing the correctness of my views. But in 1906 the  succession of rallies dangerously impaired my margins.

I was nearly twenty-seven years old. I had been at the game twelve years. But the first time I traded because of a crisis that was still to come I found that I had been using a  telescope. Between my first glimpse of the storm cloud and the time for cashing in on  the big break the stretch was evidently so much greater than I had thought that I began to

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wonder whether I really saw what I thought I saw so clearly. We had had many  warnings and sensational ascensions in call-money rates. Still some of the great  financiers talked hopefully at least to newspaper reporters and the ensuing rallies in the stock market gave the lie to the calamity howlers. Was I fundamentally wrong in being  bearish or merely temporarily wrong in having begun to sell short too soon?

I decided that I began too soon, but that I really couldn't help it. Then the market began to sell off. That was my opportunity. I sold all I could, and then stocks rallied again, to  quite a high level.

It cleaned me out.

There I was right and busted!

I tell you it was remarkable. What happened was this: I looked ahead and saw a big pile  of dollars. Out of it stuck a sign. It had "Help yourself," on it, in huge letters. Beside it  stood a cart with "Lawrence Livingston Trucking Corporation" painted on its side. I had  a brand-new shovel in my hand. There was not another soul in sight, so I had no  competition in the gold-shoveling, which is one beauty of seeing the dollar-heap ahead  of others. The people who might have seen it if they had stopped to look were just then  looking at baseball games instead, or motoring or buying houses to be paid for with the very dollars that I saw. That was the first time that I had seen big money ahead, and I  naturally started toward it on the run. Before I could reach the dollar-pile my wind went  back on me and I fell to the ground. The pile of dollars was still there, but I had lost the  shovel, and the wagon was gone. So much for sprinting too soon! I was too eager to  prove to myself that I had seen real dollars and not a mirage. I saw, and knew that I saw.  Thinking about the reward for my excellent sight kept me from considering the distance  to the dollar-heap. I should have walked and not sprinted.

That is what happened. I didn't wait to determine whether or not the time was right for  plunging on the bear side. On the one occasion when I should have invoked the aid of  my tape-reading I didn't do it. That is how I came to learn that 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.

I had traded in a good many thousands of shares at Harding's office in all those years,  and, moreover, the firm had confidence in me and our relations were of the pleasantest. I

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think they felt that I was bound to be right again very shortly and they knew that with  my habit of pushing my luck all I needed was a start and I'd more than recover what I had lost. They had made a great deal of money out of my trading and they would make  more. So there was no trouble about my being able to trade there again as long as my credit stood high.

The succession of spankings I had received made me less aggressively cocksure;  perhaps I should say less careless, for of course I knew I was just so much nearer to the  smash. All I could do was wait watchfully, as I should have done before plunging. It wasn't a case of locking the stable after the horse was stolen. I simply had to be sure, the  next time I tried. 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.

Well, sir, one fine morning I came downtown feeling cocksure once more. There wasn't any doubt this time. I had read an advertisement in the financial pages of all the  newspapers that was the high sign I hadn't had the sense to wait for before plunging. It was the announcement of a new issue of stock by the Northern Pacific and Great  Northern roads. The payments were to be made on the installment plan for the  convenience of the stockholders. This consideration was something new in Wall Street.  It struck me as more than ominous.

For years the unfailing bull item on Great Northern preferred had been the  announcement that another melon was to be cut, said melon consisting of the right of the lucky stockholders to subscribe at par to a new issue of Great Northern stock. These  rights were valuable, since the market price was always way above par. But now the  money market was such that the most powerful banking houses in the country were none  too sure the stockholders would be able to pay cash for the bargain. And Great Northern  preferred was selling at about 330!

As soon as I got to the office I told Ed Harding, "The time to sell is right now. This is  when I should have begun. Just look at that ad, will you?"

He had seen it. I pointed out what the bankers' confession amounted to in my opinion,  but he couldn't quite see the big break right on top of us. He thought it better to wait  before putting out a very big short line by reason of the market's habit of having big  rallies. If I waited prices might be lower, but the operation would be safer.

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"Ed," I said to him, "the longer the delay in starting the sharper the break will be when it  does start. That ad is a signed confession on the part of the bankers. What they fear is  what I hope. This is a sign for us to get aboard the bear wagon. It is all we needed. If I  had ten million dollars I'd stake every cent of it this minute."

I had to do some more talking and arguing. He wasn't content with the only inferences a  sane man could draw from that amazing advertisement. It was enough for me, but not for most of the people in the office. I sold a little; too little.

A few days later St. Paul very kindly came out with an announcement of an issue of its  own; either stock or notes, I forget which. But that doesn't matter. What mattered then was that I noticed the moment I read it that the date of payment was set ahead of the  Great Northern and Northern Pacific payments, which had been announced earlier. It  was as plain as though they had used a megaphone that grand old St. Paul was trying to  beat the two other railroads to what little money there was floating around in Wall  Street. The St. Paul's bankers quite obviously feared that there wasn't enough for all  three and they were not saying, "After you, my dear Alphonse!" If money already was  that scarce and you bet the bankers knew what would it be later? The railroads needed it  desperately. It wasn't there. What was the answer?

Sell 'em! Of course! The public, with their eyes fixed on the stock market, saw little that  week. The wise stock operators saw much that year. That was the difference.

For me, that was the end of doubt and hesitation. I made up my mind for keeps then and  there. That same morning I began what really was my first campaign along the lines that  I have since followed. I told Harding what I thought and how I stood, and he made no  objections to my selling Great Northern preferred at around 330, and other stocks at high  prices. I profited by my earlier and costly mistakes and sold more intelligently.

My reputation and my credit were reestablished In a jiffy. That is the beauty of being  right in a broker's office, whether by accident or not. But this time I was cold-bloodedly  right, not because of a hunch or from skilful reading of the tape, but as the result of my analysis of conditions affecting the stock market in general. I wasn't guessing. I was  anticipating the inevitable. It did not call for any courage to sell stocks. I simply could  not see anything but lower prices, and I had to act on it, didn't I? What else could I do?

The whole list was soft as mush. Presently there was a rally and people came to me to   - 79 -

Caution Stock Watchlist

What is the Caution Stock Watchlist?

Many unscrupulous people are now sending "Tips" via SMS giving targets to stocks that are of very bad quality. In Market Parlance, these are called Pump & Dump schemes, where "Operators" or "Manipulators" increase the price of a stock by various means like Circular Trading. Circular trading is where a group of people buy and sell stocks on predefined prices, but try to make it look natural. The increase in volume & price attracts public interest. When the stock reaches the predefined targets set by the manipulators, the manipulators sell out and the public is left holding stock that tanks like a stone.

One such recent example is that of Kushal Tradelink.

The stock had become a darling stock with no downfall or correction for a really long time and now finds itself locked at lower circuit and with no buyers.

Caution Stock - Kushal Infotech

Another such case was that of Onelife Capital Advisors which had a similar chart like that of Kushal Tradelink.

Caution Stock - Onelife Capital Advisors

How do these operators work?

Operators try to create artificial volumes in the market by circular trading and increasing the prices of these stocks. This process continues till volumes expand and the price goes up substantially. At once the general Public buys these stocks on the expectations of quick money. The manipulators sell their shares to the Public and the stock starts tanking. Once the panic sets in, the public tries to exit, but finds no buyers for the shares they hold while the manipulators make huge gains at the expense of public money.

We caution you against investing your hard earned money in such "operator driven" stocks.

It has often been found that acting on tips of these "Operators" out of greed without a proper understanding of these companies leads investors to lose significant money. We urge you conduct a thorough financial review before investing in these companies for the benefit of your financial health.

How have we created the Caution Stock Watchlist?

The caution stock watchlist has been created using a strict surveillance mechanism by tracking tips and other marketing communication sent by unscrupulous market elements.

While this list is not exhaustive, we are constantly going to add more stocks that we believe are prone to manipulation.

Disclaimer - This list is only for your education and information purposes and should not be considered as a recommendation or research on any of these stocks. This page shall not be considered as a solicitation for any services and the information is general in nature and not tailored to the needs of any person, entity or group of persons.