That’s the theory. That is why I never buy stocks cheap. Of course I always try to buy effectively—in such a way as to help my side of the market. When it comes to selling stocks, it is plain that nobody can sell unless somebody wants those stocks.
If you operate on a large scale you will have to bear that in mind all the time. A man studies conditions, plans his operations carefully and proceeds to act. He swings a pretty fair line and he accumulates a big profit—on paper. Well, that man can’t sell at will. You can’t expect the market to absorb fifty thousand shares of one stock as easily as it does one hundred. 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. As a rule he will have been waiting for it. He has to sell when he can, not when he wants to. To learn the time, he has to watch and test. It is no trick to tell when the market can take what you give it. But in starting a movement it is unwise to take on your full line unless you are convinced that conditions are exactly right. Remember that stocks are never too high for you to begin buying or too low to begin selling. 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. Much depends upon beginning at exactly the right time. It took me years to realize the importance of this. It also cost me some hundreds of thousands of dollars.
I don’t mean to be understood as advising persistent pyramiding. A man can pyramid and make big money that he couldn’t make if he didn’t pyramid; of course. But what I meant to say was this: Suppose a man’s line is five hundred shares of stock. I say that he ought not to buy it all at once; not if he is speculating. If he is merely gambling the only advice I have to give him is, don’t!
Suppose he buys his first hundred, and that promptly shows him a loss. Why should he go to work and get more stock? He ought to see at once that he is in wrong; at least temporarily.
VIII
The Union Pacific incident in Saratoga in the summer of 1906 made me more independent than ever of tips and talk—that is, of the opinions and surmises and suspicions of other people, however friendly or however able they might be personally. Events, not vanity, proved for me that I could read the tape more accurately than most of the people about me. I also was better equipped than the average customer of Harding Brothers in that I was utterly free from speculative prejudices. The bear side doesn’t appeal to me any more than the bull side, or vice versa. My one steadfast prejudice is against being wrong.
Even as a lad I always got my own meanings out of such facts as I observed. It is the only way in which the meaning reaches me. I cannot get out of facts what somebody tells me to get. They are my facts, don’t you see? If I believe something you can be sure it is because I simply must. When I am long of 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 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 mad at your lungs because you have pneumonia.
I had been gradually approaching the full realization of how much more than tape reading there was to stock speculation. Old man Partridge’s insistence on the vital importance of being continuously bullish in a bull market doubtless made my mind dwell on the need above all other things of determining the kind of market a man is trading in. I began to realize that the big money must necessarily be in the big swing. Whatever might seem to give a big swing its initial impulse, the fact is that its continuance is not the result of manipulations by pools or artifice by financiers, but depends upon basic conditions. And no matter who opposes it, the swing must inevitably run as far and as fast and as long as the impelling forces determine.
After Saratoga I began to see more clearly—perhaps I should say more maturely—that since the entire list moves in accordance with the main current there was not so much need as I had imagined to study individual plays or the behaviour of this or the other stock. Also, by thinking of the swing a man was not limited in his trading. He could buy or sell the entire list. In certain stocks a short line is dangerous after a man sells more than a certain percentage of the capital stock, the amount depending on how, where and by whom the stock is held. But he could sell a million shares of the general list—if he had the price—without the danger of being squeezed. A great deal of money used to be made periodically by insiders in the old days out of the shorts and their carefully fostered fears of corners and squeezes.