REMINISCENCES OF A STOCK OPERATOR - by Jesse Livermore
CHAPTER I
I WENT to work when I was just out of grammar school. I got
a job as quotation-board boy in a stock-brokerage office. I was
quick at figures. At school I did three years of arithmetic in
one. I was particularly good at mental arithmetic. As
quotation-board boy I posted the numbers on the big board in the
customers' room. One of the customers usually sat by the ticker
and called out the prices. They couldn't come too fast for me. I
have always remembered figures. No trouble at all.
There were plenty of other employes in that office. Of
course I made friends with the other fellows, but the work I
did, if the market was active, kept me too busy from ten A.M. to
three P.m. to let me do much talking. I don't care for it,
anyhow, during business hours.
But a busy market did not keep me from thinking about the
work. Those quotations did not represent prices of stocks to'
me, so many dollars per share. They were numbers. Of course,
they meant something. They were always changing. It was all I
had to be interested in the changes. Why did they change? I
didn't know. I didn't care. I didn't think about that. I simply
saw that they changed. That was all I had to think about five
hours every day and two on Saturdays: that they were always
changing.
That is how I first came to be interested in the behaviour
of prices. I had a very good memory for figures. I could
remember in detail how the prices had acted on the previous day,
just before they went up or down. My fondness for mental
arithmetic came in very handy.
I noticed that in advances as well as declines, stock
prices were apt to show certain habits, so to speak. There was
no end of parallel cases and these made precedents to guide me.
I was only fourteen, but after I had taken hundreds of
observations in my mind I found myself testing their accuracy,
comparing the behaviour of stocks today with other days. It was
not long before I was anticipating movements in prices. My only
guide, as I say, was their past performances. I carried the
"dope sheets" in my mind. I looked for stock prices to run on
form. I had "clocked" them. You know what I mean.
You can spot, for instance, where the buying is only a
trifle better than the selling. A battle goes on in the stock
market and the tape is your telescope. You can depend upon it
seven out of ten cases.
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. I've never forgotten
that. I suppose I really manage to remember when and how it
happened. The fact that I remember that way is my way of
capitalizing experience.
I got so interested in my game and so anxious to anticipate
advances and declines in all the active stocks that I got a
little book. I put down my observations in it. It was not a
record of imaginary transactions such as so many people keep
merely to make or lose millions of dollars without getting the
swelled head or going to the poorhouse. It was rather a sort of
record of my hits and misses, and next to the determination of
probable movements I was most interested in verifying whether I
had observed accurately; in other words, whether I was right.
Say that after studying every fluctuation of the day in an
active stock I would conclude that it was behaving as it always
did before it broke eight or ten points. Well, I would jot down
the stock and the price on Monday, and remembering past
performances I would write down what it ought to do on Tuesday
and Wednesday. Later I would check up with actual transcriptions
from the tape.
That is how I first came to take an interest in the message
of the tape. The fluctuations were from the first associated in
my mind with upward or downward movements. 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. Time and again I
see this happen. You'll remember that Hollow Tube went down
three points the other day while the rest of the market rallied
sharply. That was the fact. On the following Monday you saw that
the directors passed the dividend. That was the reason. They
knew what they were going to do, and even if they didn't sell
the stock themselves they at least didn't buy it. There was no
inside buying; no reason why it should not break.
Well, I kept up my little memorandum book perhaps six
months. Instead of leaving for home the moment I was through
with my work, I'd jot down the figures I wanted and would study
the changes, always looking for the repetitions and parallelisms
of behaviour learning to read the tape, although I was not aware
of it at the time.
One day one of the office boys -- he was older than I came
to me where I was eating my lunch and asked me on the quiet if I
had any money.
"Why do you want to know?" I said.
"Well," he said, "I've got a dandy tip on Burlington. I'm
going to play it if I can get somebody to go in with me."
"How do you mean, play it?" I asked. To me the only people
who played or could play tips were the customers old jiggers
with oodles of dough. Why, it cost hundreds, even thousands of
dollars, to get into the game. It was like owning your private
carriage and having a coachman who wore a silk hat.
"That's what I mean; play it 1" he said. "How much you got.
"How much you need?"
"Well, I can trade in five shares by putting up $5."
"How are you going to play it?"
"I'm going to buy all the Burlington the bucket shop will
let me carry with the money I give him for margin," he said.
"It's going up sure. It's like picking up money. We'll double
ours in a jiffy."
"Hold on!" I said to him, and pulled out my little dope
book.
I wasn't interested in doubling my money, but in his saying
that Burlington was going up. If it was, my notebook ought to
show it. I looked. Sure enough, Burlington, according to my
figuring, was acting as it usually did before it went up. I had
never bought or sold anything in my life, and I never gambled
with the other boys. But all I could see was that this was a
grand chance to test the accuracy of my work, of my hobby. It
struck me at once that if my dope didn't work in practice there
was nothing in the theory of it to interest anybody. So I gave
him all I had, and with our pooled resources he went to one of
the nearby bucket shops and bought some Burlington. Two days
later we cashed in. I made a profit Of $3.12.
After that first trade, I got to speculating on my own hook
in the bucket shops. I'd go during my lunch hour and buy or sell
-- it never made any difference to me. I was playing a system
and not a favorite stock or backing opinions. All I knew was the
arithmetic of it. As a matter of fact, mine was the ideal way to
operate in a bucket shop, where all that a trader does is to bet
on fluctuations as they are printed by the ticker on the tape.
It was not long before I was taking much more money out of
the bucket shops than I was pulling down from my job in the
brokerage office. So I gave up my position. My folks objected,
but they couldn't say much when they saw what I was making. I
was only a kid and officeboy wages were not very high. I did
mighty well on my own hook.
I was fifteen when I had my first thousand and laid the
cash in front of my mother -- all made in the bucket shops in a
few months, besides what I had taken home. My mother carried on
something awful. She wanted me to put it away in the savings
bank out of reach of temptation. She said it was more money than
she ever heard any boy of fifteen had made, starting with
nothing. She didn't quite believe it was real money. She used to
worry and fret about it. But I didn't think of anything except
that I could keep on proving my figuring was right. That's all
the fun there is being right by using your head. If I was right
when I tested my convictions with ten shares I would be ten
times more right if I traded in a hundred shares. That is all
that having more margin meant to me -- I was right more
emphatically. More courage? No! No difference! 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.
Anyhow, at fifteen I was making a good living out of the
stock market. I began in the smaller bucket shops, where the man
who traded in twenty shares at a clip was suspected of being
John W. Gates in disguise or J. P. Morgan traveling incognito.
Bucket shops in those days seldom lay down on their customers.
They didn't have to. There were other ways of parting customers
from their money, even when they guessed right. The business was
tremendously profitable. When it was conducted legitimately -- I
mean straight, as far as the bucket shop went the fluctuations
took care of the shoestrings. It doesn't take much of a reaction
to wipe out a margin of only three quarters of a point. Also, no
welsher could ever get back in the game. Wouldn't have any
trade.
I didn't have a following. I kept my business to myself. It
was a one-man business, anyhow. It was my head, wasn't it?
Prices either were 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.
As it was, it didn't take long for the bucket shops to get
sore on me for beating them. I'd walk in and plank down my
margin, but they'd look at it without making a move to grab it.
They'd tell me there was nothing doing. That was the time they
got to calling me the Boy Plunger. I had to be changing brokers
all the time, going from one bucket shop to another. It got so
that I had to give a fictitious name. I'd begin light, only
fifteen or twenty shares. At times, when they got suspicious,
I'd lose on purpose at first and then sting them proper. Of
course after a little while they'd find me too expensive and
they'd tell me to take myself and my business elsewhere and not
interfere with the owners' dividends.
Once, when the big concern I'd been trading with for months
shut down on me I made up my mind to take a little more of their
money away from them. That bucket shop had branches all over the
city, in hotel lobbies, and in nearby towns. I went to one of
the hotel branches and asked the manager a few questions and
finally got to trading. But as soon as I played an active stock
my especial way he began to get messages from the head office
asking who it was that was operating. The manager told me what
they asked him and I told him my name was Edward Robinson, of
Cambridge. He telephoned the glad news to the big chief. But the
other end wanted to know what I looked like. When the manager
told me that I said to him, "Tell him I am a short fat man with
dark hair and a bushy beard 1" But he described me instead, and
then he listened and his face got red and he hung up and told me
to beat it.
"What did they say to you?" I asked him politely.
"They said, `You blankety-blank fool, didn't we tell you to
take no business from Larry Livermore? And you deliberately let
him trim us out of $700!" He didn't say what else they told him.
I tried the other branches one after another, but they all
got to know me, and my money wasn't any good in any of their
offices. I couldn't even go in to look at the quotations without
some of the clerks making cracks at me. I tried to get
them to let me trade at long intervals by dividing my visits
among them all. But that didn't work.
Finally there was only one left to me and that was the
biggest and richest of all the Cosmopolitan Stock Brokerage
Company.
The Cosmopolitan was rated as A-1 and did an enormous
business. It had branches in every manufacturing town in New
England. They took my trading all right, and I bought and sold
stocks and made and lost money for months, but in the end it
happened with them as usual. They didn't refuse my business
point-blank, as the small concerns had. Oh, not because it
wasn't sportsmanship, but because they knew it would give them a
black eye to publish the news that they wouldn't take a fellow's
business just because that fellow happened to make a little
money. But they did the next worse thing that is, they made me
put up a three-point margin and compelled me to pay a premium at
first of a half point, then a point, and finally, a point and a
half. Some handicap, that! How? Easy! Suppose Steel was selling
at 90 and you bought it. Your ticket read, normally: "Bot ten
Steel at 90-1/8." If you put up a point margin it meant that if
it broke 89-1/4 you were wiped out automatically. In a bucket
shop the customer is not importuned for more margin or put to
the painful necessity of telling his broker to sell for anything
he can get.
But when the Cosmopolitan tacked on that premium they were
hitting below the belt. It meant that if the price was 90 when I
bought, instead of making my ticket: "Bot Steel at 90-1/8," it
read: "Bot Steel at 90-1/8." Why, that stock could advance a
point and a quarter after I bought it and I'd still be losing
money if I closed the trade. And by also insisting that I put up
a three-point margin at the very start they reduced my trading
capacity by two thirds. Still, that was the only bucket shop
that would take my business at all, and I had to accept their
terms or quit trading.
Of course I had my ups and downs, but was a winner on
balance. However, the Cosmopolitan people were not satisfied
with the awful handicap they had tacked on me, which should have
been enough to beat anybody. They tried to doublecross me. They
didn't get me. I escaped because of one of my hunches.
The Cosmopolitan, as I said, was my last resort. It was the
richest bucket shop in New England, and as a rule they put no
limit on a trade. I think I was the heaviest individual trader
they had -- that is, of the steady, everyday customers. They had
a fine office and the largest and completest quotation board I
have ever seen anywhere. It ran along the whole length of the
big room and every imaginable thing was quoted. I mean stocks
dealt in on the New York and Boston Stock Exchanges, cotton,
wheat, provisions, metals -- everything that was bought and sold
in New York, Chicago, Boston and Liverpool.
You know how they traded in bucket shops. You gave your
money to a clerk and told him what you wished to buy or sell He
looked at the tape or the quotation board and took the price
from there -- the last one, of course. He also put down the time
on the ticket so that it almost read like a regular broker's
report -- that is, that they had bought or sold for you so many
shares of such a stock at such a price at such a time on such a
day and how much money they received from you. When you wished
to close your trade you went to the clerk -- the same or
another, it depended on the shop and you told him. He took the
last price or if the stock had not been active he waited for the
next quotation that came out on the tape. He wrote that price
and the time on your ticket, O.K.'d it and gave it back to you,
and then you went to the cashier and got whatever cash it called
for. Of course, when the market went against you and the price
went beyond the limit set by your margin, your trade
automatically closed itself and your ticket became one more
scrap of paper.
In the humbler bucket shops, where people were allowed to
trade in as little as five shares, the tickets were little slips
commissions and if you bought a stock at 20 the ticket would
read 20%. You thus had only Y4 of a point's run for your money.
But the Cosmopolitan was the finest in New England. It had
thousands of patrons and I really think I was the only man they
were afraid of. Neither the killing premium nor the three-point
margin they made me put up reduced my trading much. I kept on
buying and selling as much as they'd let me. I sometimes had a
line of 5,000 shares.
Well, on the day the thing happened that I am going to tell
you, I was short thirty-five hundred shares of Sugar. I had
seven big pink tickets for five hundred shares each. The
Cosmopolitan used big slips with a blank space on them where
they could write down additional margin. Of course, the bucket
shops never ask for more margin. The thinner the shoestring the
better for them, for their profit lies in your being wiped. In
the smaller shops if you wanted to margin your trade still
further they'd make out a new ticket, so they could charge you
the buying commission and only give you a run of 1/4 of a point
on each point's decline, for they figured the selling commission
also exactly as if it were a new trade.
Well, this day I remember I had up over $10,000 in margins.
I was only twenty when I first accumulated ten thousand
dollars in cash. And you ought to have heard my mother. You'd
have thought that ten thousand dollars in cash was more than
anybody carried around except old John D., and she used to tell
me to be satisfied and go into some regular business. I had a
hard time convincing her that I was not gambling, but making
money by figuring. But all she could see was that ten thousand
dollars was a lot of money and all I could see was more margin.
I had put out my 3500 shares of Sugar at 105-1/4. There was
another fellow in the room, Henry Williams, who was short 2500
shares. I used to sit by the ticker and call out the quotations
for the board boy. The price behaved as I thought it would. It
promptly went down a couple of points and paused a little to get
its breath before taking another dip. The general market was
pretty soft and everything looked promising. Then all of a
sudden I didn't like the way Sugar was doing its hesitating. I
began to feel uncomfortable. I thought I ought to get out of the
market. Then it sold at 103 -- that was low for the day, but
instead of feeling more confident I felt more uncertain. 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.
You know, I don't do things blindly. I don't like to. I
never did. Even as a kid I had to know why I should do certain
things. But this time I had no definite reason to give to
myself, and yet I was so uncomfortable that I couldn't stand it.
I called to a fellow I knew, Dave Wyman, and said to him "Dave,
you take my place here. I want you to do something for me. Wait
a little before you call out the next price of Sugar, will you?"
He said he would, and I got up and gave him my place by the
ticker so he could call out the prices for the boy. I took my
seven Sugar tickets out of my pocket and walked over to the
counter, to where the clerk was who marked the tickets when you
closed your trades. But I didn't really know why I should get
out of the market, so I just stood there, leaning against the
counter, my tickets in my hand so that the clerk couldn't see
them. Pretty soon I heard the clicking of a telegraph instrument
and I saw Tom Burnham, the clerk, turn his head quickly and
listen. Then I felt that something crooked was hatching, and I
decided not to wait any longer. Just then Dave Wyman by the
ticker, began: "Su" and quick as a flash I slapped my tickets on
the counter in front of the clerk and yelled, "Close Sugar!"
before Dave had finished calling the price. So, of course, the
house had to close my Sugar at the last quotation. What Dave
called turned out to be 103 again.
According to my dope Sugar should have broken 103 by now.
The engine wasn't hitting right. I had the feeling that there
was a trap in the neighbourhood. At all events, the telegraph
instrument was now going like mad and I noticed that
Tom Burnham, the clerk, had left my tickets unmarked where I
laid them, and was listening to the clicking as if he were
waiting for something. So I yelled at him: "Hey, Tom, what in
hell are you waiting for? Mark the price on these tickets --
103! Get a gait on!"
Everybody in the room heard me and began to look toward us
and ask what was the trouble, for, you see, while the
Cosmopolitan had never laid down, there was no telling, and a
run on a bucket shop can start like a run on a bank. If one
customer gets suspicious the others follow suit. So Tom looked
sulky, but came over and marked my tickets "Closed at 103" and
shoved the seven of them over toward me. He sure had a sour
face.
Say, the distance from Tom's place to the cashier's cage
wasn't over eight feet. But I hadn't got to the cashier to get
my money when Dave Wyman by the ticker yelled excitedly
"Gosh! Sugar, 108!" But it was too late; so I just laughed and
called over to Tom, "It didn't work that time, did it, old boy?"
Of course, it was a put-up job. Henry Williams and I together
were short six thousand shares of Sugar. That bucket shop
had my margin and Henry's, and there may have been a lot of
other Sugar shorts in the office; possibly eight or ten thousand
shares in all. Suppose they had $20,000 in Sugar margins. That
was enough to pay the shop to thimblerig the market on the New
York Stock Exchange and wipe us out. In the old days whenever a
bucket shop found itself loaded with too many bulls on a certain
stock it was a common practice to get some broker to wash down
the price of that particular stock far enough to wipe out all
the customers that were long of it. This seldom cost the bucket
shop more than a couple of points on a few hundred shares, and
they made thousands of dollars.
That was what the Cosmopolitan did to get me and Henry
Williams and the other Sugar shorts. Their brokers in New York
ran up the price to io8. Of course it fell right back, but Henry
and a lot of others were wiped out. Whenever there was an
unexplained sharp drop which was followed by instant recovery,
the newspapers in those days used to call it a bucket-shop
drive.
And the funniest thing was that not later than ten days
after the Cosmopolitan people tried to doublecross me a New York
operator did them out of over seventy thousand dollars. This
man, who was quite a market factor in his day and a member of
the New York Stock Exchange, made a great name for himself as a
bear during the Bryan panic of '96. He was forever running up
against Stock Exchange rules that kept him from carrying out
some of his plans at the expense of his fellow members. One day
he figured that there would be no complaints from either the
Exchange or the police authorities if he took from the bucket
shops of the land some of their ill-gotten gains. In the
instance I speak of he sent thirty-five men to act as customers.
They went to the main office and to the bigger branches. On a
certain day at a fixed hour the agents all bought as much of a
certain stock as the managers would let them. They had
instructions to sneak out at a certain profit. Of course what he
did was to distribute bull tips on that stock among his cronies
and then he went in to the floor of the Stock Exchange and bid
up the price, helped by the room traders, who thought he was a
good sport. Being careful to pick out the right stock for that
work, there was no trouble in putting up the price three or four
points. His agents at the bucket shops cashed in as prearranged.
A fellow told me the originator cleaned up seventy thousand
dollars net, and his agents made their expenses and their pay
besides. He played that game several times all over the country,
punishing the bigger bucket shops of New York, Boston,
Philadelphia, Chicago, Cincinnati and St. Louis. One of his
favorite stocks was Western Union, because it was so easy to
move a semiactive stock like that a few points up or down. His
agents bought it at a certain figure, sold at two points profit,
went short and took three points more. By the way, I read the
other day that that man died, poor and obscure. I f he had died
in 1896 he would have got at least a column on the first page of
every New York paper. As it was he got two lines on the fifth.
would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
