Jesse Livermore on Patience

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.

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.

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.

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.

Anaconda was only quarter stock that is, the par of the shares was only twenty-five dollars. It took four hundred shares of it to equal the usual one hundred shares of other stocks, the par value of which was one hundred dollars. I figured that when it crossed 300 it ought to keep on going and probably touch 340 in a jiffy. I was bearish, remember, but I was also a tape-reading trader. I knew Anaconda, if it went the way I figured, would move very quickly. Whatever moves fast always appeals to me. I have learned patience and how to sit tight, but my personal preference is for fleet movements, and Anaconda certainly was no sluggard. My buying it because it crossed 300 was prompted by the desire, always strong in me, of confirming my observations.

So strong was the faith of all men in Mr. Morgan in those critical times that Thomas didn't wait for further details but rushed back to the floor of the Exchange to announce the reprieve to his death-sentenced fellow members. Then, before half past two in the afternoon, J. P. Morgan sent John T. Atterbury, of Van Emburgh & Atterbury, who was known to have close relations with J. P. Morgan & Co., into the money crowd. My friend said that the old broker walked quickly to the Money Post. He raised his hand like an exhorter at a revival meeting. The crowd, that at first had been calmed down somewhat by President Thomas' announcement, was beginning to fear that the relief plans had miscarried and the worst was still to come. But when they looked at Mr. Atterbury's face and saw him raise his hand they promptly petrified themselves.

until the tape tells him that the time is ripe. 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. The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or a fall in the price of whatever he may be speculating in. 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.

When a man makes his play in a commodity market he must not permit himself set opinions. He must have an open mind and flexibility. It is not wise to disregard the message of the tape, no matter what your opinion of crop conditions or of the probable demand may be. I recall how I missed a big play just by trying to anticipate the starting signal. I felt so sure of conditions that I thought it was not necessary to wait for the line of least resistance to define itself. I even thought I might help it arrive, because it looked as if it merely needed a little assistance.

It was much cheaper for them to let me get into debt and then to pay off the debt than to have me in some other office operating actively on the bear side. That is precisely what 1 would have been doing but for my feeling that I must not be outdone in decency by Dan Williamson. I have always considered this the most interesting and most unfortunate of all my experiences as a stock operator. As a lesson it cost me a disproportionately high price. It put off the time of my recovery several years. I was young enough to wait with patience for the strayed millions to come back. But five years is a long time for a man to be poor. Young or old, it is not to be relished. I could do without the yachts a great deal easier than I could without a market to come back on. The greatest opportunity of a lifetime was holding before my very nose the purse I had lost. I could not put out my hand and reach for it. A very shrewd boy, that Dan Williamson; as slick as they make them; farsighted, ingenious, daring. He is a thinker, has imagination, detects the vulnerable spot in any man and can plan cold-bloodedly to hit it. He did his own sizing up and soon

I think now that I found myself then at the most critical period of my career as a speculator. If I failed this time there was no telling where or when, if ever, I might get another stake for another try. It was very clear that I simply must wait for the exact psychological moment. I didn't go near Williamson & Brown's. I mean, I purposely kept away from them for six long weeks of steady tape reading. I was afraid that if I went to the office, knowing that I could buy five hundred shares, I might be tempted into trading at the wrong time or in the wrong stock. 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 no need to feel anger over being human. I have come to feel that it 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.

Every point that stock went up meant five hundred dollars I had not made. The first ten points' advance meant that I would have been able to pyramid, and instead of five hundred snares I might now be carrying one thousand shares that would be earning for me one thousand dollars a point. But I sat tight and instead of listening to my loud- mouthed hopes or to my clamorous beliefs I heeded only the level voice of my experience and the counsel of common sense. Once I got a decent stake together I could afford to take chances. But without a stake, taking chances, even slight chances, was a luxury utterly beyond my reach. Six weeks of patience but, in the end, a victory for common sense over greed and hope!

for the first time in many months did not come back. Their race evidently was run, and that clearly necessitated a change in my trading tactics. It was simple enough. In a bull market the trend of prices, of course, is decidedly and definitely upward. Therefore whenever a stock goes against the general trend you are justified in assuming that there is something wrong with that particular stock. It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say "Get out!" and not wait for it to submit a legal brief for approval.

On the news the market broke badly and I naturally covered. It was the only play possible. 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. For one thing, on a bad break like that you have a big market, one that you can turn around in, and that is the time to turn your paper profits into real money. Even in a bear market a man cannot always cover one hundred and twenty thousand shares of stock without putting up the price on himself. He must wait for the market that will allow him to buy that much at no damage to his profit as it stands him on paper.

At 2:20 that afternoon I did not own a single bale, but at 2:25 my belief that peace was impending made me buy fifteen thousand bales as a starter. I proposed to follow my old system of trading that is, of buying my full line which I have already described to you. That very afternoon, after the market closed, we got the Unrestricted Warfare note. There wasn't anything to do except to wait for the market to open the next day. I recall that at Gridley's that night one of the greatest captains of industry in the country was offering to sell any amount of United States Steel at five points below the closing price that afternoon. There were several Pittsburgh millionaires within hearing. Nobody took the big man's offer. They knew there was bound to be a whopping big break at the opening.

very deeply into the particular problem of the coffee market. They fixed on a maximum price for raw coffee and also fixed a time limit for closing out all existing contracts. This decision meant, of course, that the Coffee Exchange would have to go out of business. There was only one thing for me to do and I did it, and that was to sell out all my contracts. Those profits of millions that I had deemed as certain to come my way as any I ever made failed completely to materialise. I was and am as keen as anybody against the profiteer in the necessaries of life, but at the time the Price Fixing Committee made their ruling on coffee, all other commodities were selling at from 250 to 400 per cent above pre-war prices while raw coffee was actually below the average prevailing for some years before the war. I can't see that it made any real difference who held the coffee. The price was bound to advance; and the reason for that was not the operations of conscienceless speculators, but the dwindling surplus for which the diminishing importations were responsible, and they in tum were affected exclusively by the appalling destruction of the world's ships by the German submarines. The committee did not wait for coffee to start; they clamped on the brakes.

I had an interesting experience in cotton. I was bearish on stocks and put out a moderate short line. At the same time I sold cotton short; 50,000 bales. My stock deal proved profitable and I neglected my cotton. The first thing I knew I had a loss of $250,000 on my 50,000 bales. As I said, my stock deal was so interesting and I was doing so well in it that I did not wish to take my mind off it. Whenever I thought of cotton I just said to myself: "I'll wait for a reaction and cover." The price would react a little but before I could decide to take my loss and cover the price would rally again, and go higher than ever. So I'd decide again to wait a little and I'd go back to my stock deal and confine my attention to that. Finally I closed out my stocks at a very handsome profit and went away to Hot Springs for a rest and a holiday.

Of course, there have been people who have spoken about certain "unsavory incidents" in the market career of TT stock. But I dare say these critics were suffering from the squeezing. Why do the room traders, who have suffered so often from the loaded dice of the insiders, continue to go up against the game? Well, for one thing they like action and they certainly get it in Tropical Trading. No prolonged spells of dulness. No reasons asked or given. No time wasted. No patience strained by waiting for the tipped movement to begin. Always enough stock to go around except when the short interest is big enough to make the scarcity worth while. One born every minute!

by tests not alone in Pete Products but in other stocks as well. I didn't wait for the bear market to announce its safe arrival before I started selling. Of course I didn't sell a share of Pete Products, though I was short of other stocks. The Pete Products pool, as I expected, was hung up with all they held to begin with and with all they had to take in their futile effort to hold up the price. In the end they did liquidate; but at much lower figures than they would have got if Prentiss had let me sell when and as I wished. It could not be otherwise. But Prentiss still thinks he was right or says he does. I understand he says the reason I gave him the advice I did was that I was short of other stocks and the general market was going up. It implies, of course, that the break in Pete Products that would have resulted from selling out the pool's holdings at any price would have helped my bear position in other stocks.

After Wolff and Kane and Gordon told me that they had formed their syndicate to put up six millions in cash there was nothing for me to do but wait for the money to come in. I had urged the vital need of haste. Nevertheless the money came in driblets. I think it took four or five installments. I don't know what the reason was, but I remember that I had to send out an S O S call to Wolff and Kane and Gordon.