This is a passage I’ve always wanted to publish… There is one sentence that has been haunting me ever since as it was the most intriguing I ever came across in a book about trading. It is a very simple one yet it represents the essence of what it takes to be successful in the markets. I’ll highlight this piece of timeless advice at the end of the article. It is taken from Edwin Lefèvre’s book: Reminiscences of a Stock Operator. A book about one of the best traders of all time. Jesse Livermore. I strongly recommend reading it if you haven’t done so yet. You can download Reminiscences for free. For more excerpts, quotes and free ebook downloads go to my book section.
The first quote is from the foreword by Jack Schwager the ensuing excerpt in my opinion is one of the most important passages in ‘Reminiscences’. Enjoy!
I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the 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.
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
The customer would finish the tale of his perplexity and then ask: “What do you think I
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
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
“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
“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
“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!”
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
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
What old Mr. Partridge said did not mean much to me until I began to think about my
own numerous failures to make as much money as I ought to when I was so right on the
general market. The more I studied the more I realized how wise that old chap was. He
had evidently suffered from the same defect in his young days and knew his own human
weaknesses. He would not lay himself open to a temptation that experience had taught
him was hard to resist and had always proved expensive to him, as it was to me.
I think it was a long step forward in my trading education when I realized at last that
when old Mr. Partridge kept on telling the other customers, “Well, you know this is a
bull market!” he really meant to tell them that the big money was not in the individual
fluctuations but in the main movements that is, not in reading the tape but in sizing up
the entire market and its trend.
And right here let me say one thing: After spending many years in Wall Street and after
making and losing millions of dollars I want to tell you this: It never was my thinking
that made the big money for me. It always was my sitting. Got that? My sitting tight! It
is no trick at all to be right on the market. You always find lots of early bulls in bull
markets and early bears in bear markets. I’ve known many men who were right at
exactly the right time, and began buying or selling stocks when prices were at the very
level which should show the greatest profit. And their experience invariably matched
mine that is, they made no real money out of it. Men who can both be right and sit tight
are uncommon. I found it one of the hardest things to learn. But it is only after a stock
operator has firmly grasped this that he can make big money. It is literally true that
millions come easier to a trader after he knows how to trade than hundreds did in the
days of his ignorance.
The reason is that a man may see straight and clearly and yet become impatient or
doubtful when the market takes its time about doing as he figured it must do. That is
why so many men in Wall Street, who are not at all in the sucker class, not even in the
third grade, nevertheless lose money. The market does not beat them. They beat
themselves, because though they have brains they cannot sit tight. Old Turkey was dead
right in doing and saying what he did. He had not only the courage of his convictions but
the intelligent patience to sit tight.
If I sold that stock now I’d lose my position; and then where would I be?
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