Reminiscences of a Stock Operator - Edwin Leveree

Chapter 2

• 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 reason for buying or selling stocks daily or sufficient knowledge to make his plan an intelligent play.

Chapter 5

• The average ticker hound goes wrong as much from over-specialization as anything else.  After all, the game of speculation isn't all mathematics or set rules.
• 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.
• All a man needs to know to make money is to appraise conditions
• 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.
• I made up my mind to be wise and play carefully, conservatively.  Everybody knew that the way to do that was to take profits and buy back your stocks on reactions.  And that is precisely what I did, or rather what I tried to do; for I often took profits and waited for a reaction that never came.  And I saw my stock go kiting up ten points more and I sitting there with my four-point profit safe in my conservative pocket. 
• That is when I discovered that suckers differ among themselves according  to the degree of experience.
• This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines.  He waits for them.  In big bull markets the plain unadultered sucker buys blindly because he hopes blindly.  He makes money until one of the healthy reactions takes it away from him at one fell swoop.  But the Careful Mike sucker does what I did when I thought I was playing the game intelligently according to the intelligence of others.
• The big money was not in the individual fluctuation but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend
• After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this:  It was never my thinking that made the big money for me /  It was always the sitting.  My sitting tight!  It is not 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 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 yet 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.  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.  The market does not beat them.  They beat themselves because though they have brains they cannot sit tight.
• 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 hte bull market is near its end.  
• To do this you must study general conditions and not tips or special factors affecting individual stocks.  Then get out of all your stocks!  Wait until you see or until you think you see the turn of the market; the beginning of reversal of general conditions.

Chapter 7

• You can't expect a market to absorb 50k shares of one stock as easily as it does 100.  He will have to wait until he has a market there to take it.  There comes the time when he thinks the requisite buying power is there.  When that opportunity comes he must seize it.  He has to sell when he can, not when he wants to.  To learn the time to sell , he has to watch and test.
• 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.  It took me years to realize the importance of this.
• Suppose a man's line is 500 shares of stock.  I say that he ought not to buy it all at once.  Suppose he buys his first hundred, and that promptly shows him  a loss.  He ought to see at once that he is in wrong; at least temporarily.

Chapter 8

• When I am long stocks it is because my reading of conditions has made me bullish.  But you find many people, reputed to be intelligent, who are bullish because they have stocks.  I do not allow my pre-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 made at your lungs because you have pneumonia.
• summary of shorting into a bear market
• he was the first man who could see a big pile of gold, so he started running towards it with a shovel and wagon.  then a big gust of wind came and knocked him over and he lost his shovel and wagon.  he got up dusted himself and kept on running towards that big pile of gold.  he tripped and lost his shirt, but got up and kept on running until he couldn't run anymore.  then he realized he should have been walking to that big pile of gold, not running.
• every time he shorted, the market would rally hard until he had lost almost all his money.  he should have waited until the conditions were exactly right for him to place his short.  
• When the market was ready to weaken:  This came when he saw a printed advertisement for some stock in a newspaper.  It was for an IPO for some stock just ahead of two other IPO issues which had been announced earlier.  The later issue was trying to beat the other two railroad IPO to whatever little money was there floating around Wall Street. This is why Cramer says pay attention to the IPO market.

Chapter 9

• When stocks cross the 100, 200, 300...ect.. threshold, they tend to run up.  However, during this bear market, when the tape suggested a stock that had just crossed 300, when to about 302 and started falling, when it should have gone up to 310.  He sold the shares at a small loss, and began shorting lots of other stocks.
• Bear market rallies 
• Call money rates will keep going higher and higher (rates banks lend to brokers)
• When the bottom comes, there will need to be some injection of liquidity.  In his example it was provided by bank reserves by JP Morgan, ect.  There was also no bids for particular stocks that usually are bellwethers for the economy,

Chapter 10

• 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.  The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction.
• Pat Hearne system - professional gamblers don't chase big wins.  they want highly probable moderate wins.  
• Pat's system was based on buying 100 shares at a particular price, if the stock moved up 1%, he'd buy 100 more shares and set a stop at -1% for 200 shares.  If it moved up another 1% he'd buy 100 more shares and reset his stop at -1% for 300 shares.
• The successful trader has to fight their two depp-seatd instincts.  He has to reverse what you might call his natural impulse.  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. 
• The conclusion that I have reached after nearly their years of constant trading, both on a shoestring and with millions of dollars is this: A man may beat a stock or a group at a certain time, but no man living can beat the stock market!  A man may beat a horse race, but he cannot beat horse racing.

Chapter 12

• Percy Thomas - he was a brilliant salesman who sold some books to Livingston. he had a 'magnetic' personality and was very intelligent
• They became friends and would talk stocks / commodities.  One day Thomas came up with a bullish pitch for cotton and Livingston had a small bearish position.  He began to accept Thomas's facts and figures and began to feel he had been basing his previous position on misinformation.
• Once he had covered, he had to go long cotton because he had become convinced.
• More than once I was warned against placing too much reliance on Percy Thomas' brilliant analyses.  It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when expressed by a brilliant mind.

Chapter 17

• I have sometimes bought a stock during an undoubted bull market and found out that other stocks in the same group were not acting bullishly and I have sold out my stock.  Why?  Experience tells me that it is not wise to buck against what I may call the manifest group-tendency.  I cannot expect to play certainties only.  I must recon probabilities and anticipate them.

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

Chapter 21 - Manipulating Imperial Steel

•  He had options at $100 and stock to go from $70 to $100.
• There wasn't much of a float and very low volume, but the the stock was undervalued at $70.
• He created demand by buying up all the stock at $70 and a little higher to attracted lots of traders who consequently took it higher.
• He sold most of the shares he had to the traders and they eventually stopped buying once they noticed his demand had stopped.  They subsequently sold the stock at which he bought at a point higher than $70.
• He did this until he marked up the stock to $100, and on balance only accumulated about 7000 shares.  For every share he bought, he expected the public to buy at least 1 share as well on balance.  But the big selling of your accumulated position is down on the way down.

Chapter 24

• The public always wants to be told.  That is what makes tip-giving and tip-taking universal practices.
• Brokers should not dwell too strongly on actual conditions because the course of the market is always 6 to 9 months ahead of actual conditoins 
• Today's earnings do not justify brokers in advising their customers to buy stock sunless there is some assurance that 6 to 9 months from today the business outlook will warrant the belief that the same rate of earning will be maintained. 
• The trader must look far ahead.  If on looking that far ahead you can see, reasonably clearly, that conditions are developing which will change the present actual power, the argument about stocks being cheap today will disappear.
• There is a law that punishes whoever originate or circulates rumors calculated to affect adversely the credit or business of individuals or corporations, that tend to depress the values of securities by influencing the public to sell.  Originally the chief intention may have been to reduce the danger of panic by punishing anyone who doubted aloud the solvency of banks in times of stress.  But it serves also to protect the public against selling stocks below their real value.  It punishes the dissemination of bearish items of that nature. 
• The nature of the game as it is played is such that the public should realize that the truth cannot be told by the few who know.