Equatorial Countercurrent

A battle goes on in the stock market and the tape is your telescope. 4

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 today has happened before and will happen again. 4

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 today, at forty. The reason for what a certain stock does today 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. 4

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. 7

Prices were either 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. 7

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. 11

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. 14

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. 14

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. 14

The 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. 15

A stock operator has to fight a lot of expensive enemies within himself. 15

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. 17

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. 27

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. 27

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. 27

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 that is, to lose money. And I am only right when I make money. That is speculating. 28

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. 31

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. 36

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! 48

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. 49

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. 50

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. 50

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. 51

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. 52

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. 52

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. 56

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….Men who can both be right and sit tight are uncommon. 57

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. 57

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. 57

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. 57

This 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. 58

When I have argued myself into disregarding my impulse and have stood pat I have always had cause to regret it. 60

The bull forces were at work, and the public never is independently responsive to news. You see that all the time. If there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on at the same time, certain news items fail to have the effect they would have if the Street was bearish. It is all in the state of sentiment at the time. 64

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. 66

From then on I began to think of basic conditions instead of individual stocks. 70

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….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. 71

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. 71

I never want to buy stocks too cheap or too easily. 73

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. 76

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! 76

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. 77

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. 77

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. 82

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. 82

It was very curious how, after suffering tremendous losses from a break of fifteen or twenty points, people who were still hanging on, welcomed a three-point rally and were certain the bottom had been reached and complete recovery begun. 85

I have always played a lone hand. I began that way in the bucket shops and have kept it up. It is the way my mind works. I have to do my own seeing and my own thinking. But I can tell you after the market began to go my way I felt for the first time in my life that I had allies—the strongest and truest in the world: underlying conditions. 87

The only thing to do when a man is wrong is to be right by ceasing to be wrong. 91

The big men of the Street 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. 95

But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities. 96

All stock market mistakes wound you in two tender spots—your pocketbook and your vanity. 104

A stock speculator sometimes makes mistakes and knows that he is making them. 104

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 cousins 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. 104

Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong—not taking the loss—that is what does the damage to the pocketbook and to the soul. 104

“Sell down to the sleeping point.” 105

After a man makes money in the stock market he very quickly loses the habit of not spending. But after he loses his money it takes him a long time to lose the habit of spending. 105

In the long run commodity prices are governed but by one law—the economic law of demand and supply. The business of the trader in commodities is simply to get facts about the demand and the supply, present and prospective. 105

The average American is from Missouri everywhere and at all times except when he goes to the brokers’ offices and looks at the tape. 106

For purposes of easy explanation we will say that prices, like everything else, move along the line of least resistance. 106

The trend is evident to a man who has an open mind and reasonably clear sight, for it is never wise for a speculator to fit his facts to his theories. 106

As a matter of fact, millions upon millions of dollars have been lost by men who bought stocks because they looked cheap or sold them because they looked dear. 107

Therefore the thing to determine is the speculative line of least resistance at the moment of trading; and what he should wait for is the moment when that line defines itself, because that is his signal to get busy. 107

The public is so often whipsawed that one marvels at their persistence in not learning their lesson. 107

Stocks are never too high to buy or too low to sell. The price, per se, has nothing to do with establishing my line of least resistance. 108

You will find in actual practice that if you trade as I have indicated any important piece of news given out between the closing of one market and the opening of another is usually in harmony with the line of least resistance. The trend has been established before the news is published, and in bull markets bear items are ignored and bull news exaggerated, and vice versa. 108

In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be—up or down. 110

A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations. 110

It is surprising how many experienced traders there are who look incredulous when I tell them that when I buy stocks for a rise I like to pay top prices and when I sell I must sell low or not at all. 111

It might be I was only temporarily wrong. But as I have said before it doesn’t pay to start wrong in anything. 112

“You can’t tell till you bet.” 113

I sometimes think that speculation must be an unnatural sort of business, because I find that the average speculator has arrayed against him his own nature. The weaknesses that all men are prone to are fatal to success in speculation. 114

The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear….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. 115

And the conclusion that I have reached after nearly thirty years of constant trading, both on a shoestring and with millions of dollars back of me, is this: A man may beat a stock or a group at a certain time, but no man living can beat the stock market! 115

The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to. 118

A trader gets to play the game as the professional billiard player does—that is, he looks far ahead instead of considering the particular shot before him. 118

A man must be on the lookout so alertly that when his chance sticks in its head at his door he must grab it. 125

I play a lone hand by choice and also because it is the wisest and cheapest way to trade. 128

I have learned that a man may possess an original mind and a lifelong habit of independent thinking and withal be vulnerable to attacks by a persuasive personality. 128

I am so accustomed to losing money that I never think first of that phase of my mistakes. It is always the play itself, the reason why. In the first place I wish to know my own limitations and habits of thought. Another reason is that I do not wish to make the same mistake a second time. A man can excuse his mistakes only by capitalising them to his subsequent profit. 129

You can never bank on there being but one remarkable salesman in the world or on complete immunizations from the influence of personality. 133

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. 134

Of all speculative blunders there are few greater than trying to average a losing game….Always sell what shows you a loss and keep what shows you a profit. 136

But fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill, knowing you have to pay it, no matter what the amount may be. 137

If you know much about the average customer of the average commission house you will agree with me that the hope of making the stock market pay your bill is one of the most prolific sources of loss in Wall Street. 137

There isn’t a man in Wall Street who has not lost money trying to make the market pay for an automobile or a bracelet or a motor boat or a painting. I could build a huge hospital with the birthday presents that the tight-fisted stock market has refused to pay for. In fact, of all hoodoos in Wall Street I think the resolve to induce the stock market to act as a fairy godmother is the busiest and most persistent. 139

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. 150

Noblesse oblige—but not in the stock market, because the tape is not chivalrous and moreover does not reward loyalty. 150

I have come to feel that it is as necessary to know how to read myself as to know how to read the tape. 158

I think I have told you it has been my experience that whenever a stock crosses 100 or 200 or 300 for the first time, it nearly always keeps going up for 30 to 50 points—and after 300 faster than after 100 or 200….It is an old trading principle. 158

That the public did not turn all their paper profits into good hard cash or that they did not long keep what profits they actually took was merely history repeating itself. 161

Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature. 161

A man does not swear eternal allegiance to either the bull or the bear side. His concern lies with being right. 161

A market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break. 161

Therefore whenever a stock goes against the general trend you are justified in assuming that there is something wrong with that particular stock. 161

When something happens on which you did not count when you made your plans it behooves you to utilise the opportunity that a kindly fate offers you. 163

I have told you before, my experience of thirty years as a trader is that such accidents are usually along the line of least resistance on which I base my position in the market. 163

Another thing to bear in mind is this: Never try to sell at the top. It isn’t wise. Sell after a reaction if there is no rally. 163

In a bear market it is always wise to cover if complete demoralisation suddenly develops. 165

When I lose money by reason of some development which nobody could foresee I think no more vindictively of it than I do of an inconveniently timed storm. 168

No profit should be counted safe until it is deposited in your bank to your credit. 169

The reasons for exaggerating the magnitude and the effect of my operations, I suppose, was the need to satisfy the public’s insatiable demand for reasons for each and every price movement. 174

As I have said a thousand times, no manipulation can put stocks down and keep them down. 174

I should say that in ninety-nine cases out of a hundred, so-called raids are really legitimate declines, accelerated at times but not primarily caused by the operations of a professional trader. 174

Tips! How people want tips! They crave not only to get them but to give them. 176

But the bloom was off the bull market for keeps, so the pool was compelled to market what stock it could on the way down to those people who love to buy after a good reaction, on the fallacy that a stock that has once sold at 150 must be cheap at 130 and a great bargain at 120. 177

It has always seemed to me the height of damfoolishness to trade on tips….To be told precisely what to do to be happy in such a manner that you can easily obey is the next nicest thing to being happy….It is not so much greed made blind by eagerness as it is hope bandaged by the unwillingness to do any thinking. 182

The belief in miracles that all men cherish is born of immoderate indulgence in hope. 182

The farther away the source the purer the tip. 183

“I never buy at the bottom and I always sell too soon.” 186

The training of a stock trader is like a medical education….It really isn’t automatism. It is that he has diagnosed the case according to his observations of such cases during a period of many years; and, naturally, after he has diagnosed it, he can only treat it in the way that experience has taught him is the proper treatment. 193

Observation, experience, memory and mathematics—these are what the successful trader must depend on. 193

And then, like the physician who keeps up with the advances of science, the wise trader never ceases to study general conditions, to keep track of developments everywhere that are likely to affect or influence the course of the various markets….This difference between the professional and the amateur or occasional trader cannot be overemphasized. 194

Experience has taught me that the way a market behaves is an excellent guide for an operator to follow. It is like taking a patient’s temperature and pulse or noting the colour of the eyeballs and the coating of the tongue. 195

Following the dictates of experience may possibly fool you, now and then. But not following them invariably makes an ass of you. 195

I study because my business is to trade. The moment the tape told me that I was on the right track my business duty was to increase my line. I did. That is all there is to it. 196

I have found that experience is apt to be steady dividend payer in this game and that observation gives you the best tips of all. 196

Experience tells me that it is not wise to buck against what I may call the manifest group-tendency. 196

Experiences had taught me to beware of buying a stock that refuses to follow the group-leader. 197

The reason, as usual, was disclosed after the break. But the warning came before the break. I don’t look out for the breaks; I look out for the warnings. 197

I myself didn’t sell on the news; I had sold long before, on the stock’s behaviour. 199

The public had bought almost a half million shares and the only change in ownership possible was from one set of ignorant outsiders who would sell in the hope of stopping losses to another set of ignorant outsiders who might buy in the hope of making money. 200

With me to feel that I am wrong and to decide to get out are practically one process. 200

History repeats itself all the time in Wall Street. 203

But facts are facts and the strongest of all allies are conditions. 205

The course of the market at a given time does not necessarily prove me wrong. It is the character of the advance—or of the decline—that determines for me the correctness or the fallacy of my market position. 206

The most effective retort courteous is that which the tape alone can print. 206

I stood pat throughout because I knew my position was sound. I wasn’t bucking the trend of the market or going against basic conditions but the reverse, and that was what made me so sure of the failure of an over-confident inside clique. 208

Knowledge is power and power need not fear lies—not even when the tape prints them. 208

On the other hand there is profit in studying the human factors—the ease with which human beings believe what it pleases them to believe; 210

Fear and hope remain the same; therefore the study of the psychology of speculators is as valuable as it ever was. 210

“The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past.” 211

The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privilege of proving conclusively that it cannot be found on this sordid earth. 211

He that sells what isn’t hisn Must buy it back or go to prisn. 213

The general public does not take kindly to the short side of the account. 213

He had in superlative degree the qualities of mind that are associated with successful speculators anywhere. That he did not argue with the tape is plain. He was utterly fearless but never reckless. He could and did turn in a twinkling, if he found he was wrong. 219

There are men whose gait is far quicker than the mob’s. They are bound to lead—no matter how much the mob changes. 219

Stocks are manipulated to the highest point possible and then sold to the public on the way down. 221

After all is said and done, the greatest publicity agent in the wide world is the ticker, and by far the best advertising medium is the tape. 223

It is perfectly astonishing how much stock a man can get rid of on a decline. 225

The chap who is compelled to lug a corpse a year or two always loses more than the original cost of the deceased; he is sure to find himself tied up with it when some really good things come his way. 227

I do not volunteer advice and I never give tips, but I have nothing to gain in my operations from secrecy. At the same time I realise that the best of all tipsters, the most persuasive of all salesmen, is the tape. 230

Well, you would be surprised at the frequency with which some of our most successful promoters behave like peevish women because the market does not act the way they wish it to act. They seem to take it as a personal slight, and they proceed to lose money by first losing their temper. 233

I myself never have believed in blind gambling. I may plunge or I may buy one hundred shares. But in either case I must have a reason for what I do. 238

In every boom companies are formed primarily if not exclusively to take advantage of the public’s appetite for all kinds of stocks. 240

The top is never in sight when the vision is vitiated by hope. 240

The big money in booms is always made first by the public—on paper. And it remains on paper. 240

If insiders don’t buy their own stock on recessions, who should? The absence of inside support is generally accepted as a pretty good bear tip. 244

When a stock goes up on buying by insiders who refuse to encourage the world at large to follow suit the ticker hounds begin to wonder aloud when the official notice will be given out. 251

“The only way I know of making a stock go up is to buy it.” 251

But on the way down I could reach those buyers who always argue that a stock is cheap when it sells fifteen or twenty points below the top of the movement, particularly when that top is a matter of recent history. 257

Getting angry doesn’t get a man anywhere. More than once it has been borne in on me that a speculator who loses his temper is a goner. 257

Speculation in stocks will never disappear. It isn’t desirable that it should. It cannot be checked by warnings as to its dangers. You cannot prevent people from guessing wrong no matter how able or how experienced they may be. 259

Disaster may come from a convulsion of nature or from the weather, from your own greed or from some man’s vanity; from fear or from uncontrolled hope. 259

But today a man is trading in everything; almost every industry in the world is represented. It requires more time and more work to keep posted and to that extent stock speculation has become much more difficult for those who operate intelligently. 260

There are many thousands of people who buy and sell stocks speculatively but the number of those who speculate profitably is small. 260

The speculator’s deadly enemies are: Ignorance, greed, fear, and hope. All the statute books in the world and all the rules of all the Exchanges on earth cannot eliminate these from the human animal. 260

The circulation of bullish items by the newspapers and the tickers is the most pernicious of all. 261

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. 261

The public ought to grasp firmly this one point: That the real reason for a protracted decline is never bear raiding. When a stock keeps on going down you can bet there is something wrong with it, either with the market for it or with the company. 265

The public might profitably consider the disadvantages under which it labours when it tries to make money buying and selling the stock of a company concerning whose affairs only a few men are in a position to know the whole truth. 267

In a bull market and particularly in booms the public at first makes money which it later loses simply by overstaying the bull market. This talk of “bear raids” helps them to overstay. The public should beware of explanations that explain only what unnamed insiders wish the public to believe. 268

The public always want to be told. That is what makes tip-giving and tip-taking universal practices. 269

But if after a long steady rise a stock turns and gradually begins to go down, with only occasional small rallies, it is obvious that the line of least resistance has changed from upward to downward. Such being the case why should any one ask for explanations? 272

I have said many times and cannot say it too often that the experience of years as a stock operator has convinced me that no man can consistently and continuously beat the stock market though he may make money in individual stocks on certain occasions. 272

No matter how experienced a trader is the possibility of his making losing plays is always present because speculation cannot be made 100 percent safe. 272

Wall Street professionals know that acting on “inside” tips will break a man more quickly than famine, pestilence, crop failures, political readjustments or what might be called normal accidents. There is no asphalt boulevard to success in Wall Street or anywhere else. Why additionally block traffic? 272