Lessons from Reminisces of a Stock Operator

A lot of people in the office like this book. I liked it, too, but perhaps not with such a high perceived enthusiasm. I have a feeling that in a year or two after I'm in the business I would take away something completely different and much more from the book than I do right now.

So here are some of the notes to learn about trading or the stock market from the book:

I was twetny when I made my first ten thousand, and I lost that. But I knew how and why... ... ... I hoped to win, instead of knowing that I ought to win on form.

The game of speculation isn't all mathematics or set rules, however rigid the main laws may be. Even in my tape reading something etners that is more than mere arithmetics. There is what I call the behavior of a stock, actions that enable you to judge whether or not it is going to proceed in accordance with the precedents that your observation has noted. If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit.

I 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.

They say you never grow poor taking profits. No, you don't. But neither do you grow rich aking a four-point profit in a bull market

Suckers differ among themselves according to the degree of experience.

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

It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!... ... ... It is only after a stock operator has firmly grasped this that he can make big money.

One of the most helpful things that anybody can learn is to give up rying to catch the last eighth--or the first. These two are the most expensive eights in the world. The have cost stock traders, in teh aggregate, enough millions of dollars to build a concrete highway across the continent.

Remember that stocks are never too high for you to begin buying or too low to begin 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 comes 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.

To be angry at the market because it unexpectedly or even illogically goes against you is like getting made at your lungs because you have pneumonia

In this business a man has to think of both theory and practice. A speculator must not be merely a student, he must be both a student and a speculator.

The big men of the Stret are as prone to be wishful thinkers as the politicians or the plain suckers. I myself can't work that way. In a speculator such an attitude is fatal.

Of course, if a man is both wise and lucky, he will not make the same mistake twice. But he will make any one of the ten thousand brothers or cousines of the original. The Mistake family is so large that there is always one of them around when you want to see what you can do in the fool-play line.

It would not be so difficult to make money if a trader always stuck to his speculative guns---that is, waited for the line of least resistance to define itself and begin buying only when the tape said up or selling only when it said down. He should accumulate his line on the way up. Let him buy one-fifth of his full line. If that does not show him a profit he must not increase his holdings because he has obviously begun wrong; he is wrong temporarily and there is no profit in being wrong at any time. The same tape that said UP did not necessarily lie merely because it is now saying NOT YET.

You can't tell till you bet.

The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear... ... ... Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.

A man may beat a stock or a group at a certain time, but no man living can beat the stock market.

A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.

Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so wel known to me that even now I marvel at myself for doing the reverse.

The loss of the money didn't bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.

A trader, in addition to studying basic conditions, remembering market precedents and keeping in mind the psychology of the outside public as well as the limitations of his brokers, must also know himself and provide against his own weaknesses. There is not need to feel anger over being human. I have come to feel that is is as necessary to know how to read myself as to know how to read the tape. I have studied and reckoned on my own reactions to given impulses or to the inevitable temptations of an active market, quite in the same mood and spirit as I have considered crop conditions or analysed reports of earnings.

TIPS! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity.

I sometimes think that tip-takers are like drunkards. There are some who can't resist the craving and always look forward to those jags which they consider indispensalbe to their happiness.

Observation, experience, memory and mathematics---these are what the successful trader must depend on. He must not only observe accurately but remember at all times what he has observed. He cannot be on the unreasonable or on the unexpected however strong his personal convictions may be about man's unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities---that is, try to anticipate them. years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass.

When the stock you are manipulating doesn't act as it should, quit. Don't agrue with the tape. Do not seek to lure the profit back. Quit while the quitting is good---and cheap.

In addition to trying to determine how to make money one must also try to keep from losing money. It is almost as important to know what not to do as to know what should be done.