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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 behavior 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 on 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. 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, railroad earnings, and financial and commercial
statistic. 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 have spurred me
too 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 "rightness" 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
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