Reminiscences of a Stock Operator

by Edwin Lefevre

And with my eyes wide open, to boot! And it wasn’t the only period of my life when I did it, either. A stock operator has to fight a lot of expensive enemies within himself. Anyhow, I came to New York with twenty-five hundred dollars. There were no bucket shops here that a fellow could trust. The Stock Exchange and the police between them had succeeded in closing them up pretty tight. Besides, I wanted to find a place where the only limit to my trading would be the size of my stake. I didn’t have much of one, but I didn’t expect it to stay little forever. The main thing at the start was to find a place where I wouldn’t have to worry about getting a square deal. So I went to a New York Stock Exchange house that had a branch at home where I knew some of the clerks. They have long since gone out of business. I wasn’t there long, didn’t like one of the partners, and then I went to A. R. Fullerton & Co. Somebody must have told them about my early experiences, because it was not long before they all got to calling me the Boy Trader. I’ve always looked young. It was a handicap in some ways but it compelled me to fight for my own because so many tried to take advantage of my youth. The chaps at the bucket shops seeing what a kid I was, always thought I was a fool for luck and that was the only reason why I beat them so often.

Well, it wasn’t six months before I was broke. I was a pretty active trader and had a sort of reputation as a winner. I guess my commissions amounted to something. I ran up my account quite a little, but, of course, in the end I lost. I played carefully; but I had to lose. I’ll tell you the reason: it was my remarkable success in the bucket shops!

I could beat the game my way only in a bucket shop, where I was betting on fluctuations. My tape reading had to do with that exclusively. When I bought the price was there on the quotation board, right in front of me. Even before I bought I knew exactly the price I’d have to pay for my stock. And I always could sell on the instant. I could scalp successfully, because I could move like lightning. [I could follow up my luck or cut my loss in a second.] Sometimes, for instance, I was certain a stock would move at least a point. Well, I didn’t have to hog it, I could put up a point margin and double my money in a jiffy; or I’d take half a point. On one or two hundred shares a day, that wouldn’t be bad at the end of the month, what?

The practical trouble with that arrangement, of course, was that even if the bucket shop had the resources to stand a big steady loss, they wouldn’t do it. They wouldn’t have a customer around the place who had the bad taste to win all the time.

At all events, what was a perfect system for trading in bucket shops didn’t work in Fullerton’s office. There I was actually buying and selling stocks. The price of Sugar on the tape might be 105 and I could see a three-point drop coming. As a matter of fact, at the very moment the ticker was printing 105 on the tape the real price on the floor of the Exchange might be 104 or 103. By the time my order to sell a thousand shares got to Fullerton’s floor man to execute, the price might be still lower. I couldn’t tell at what price I had put out my thousand shares until I got a report from the clerk. When I surely would have made three thousand on the same transaction in a bucket shop I might not make a cent in a Stock Exchange house. Of course, I have taken an extreme case, but the fact remains that in A. R. Fullerton’s office the tape always talked ancient history to me, as far as my system of trading went, and I didn’t realise it.

And then, too, if my order was fairly big my own sale would tend further to depress the price. In the bucket shop I didn’t have to figure on the effect of my own trading. I lost in New York because the game was altogether different. It was not that I now was playing it legitimately that made me lose, but that I was playing it ignorantly. I have been told that I am a good reader of the tape. But reading the tape like an expert did not save me. I might have made out a great deal better if I had been on the floor myself, a room trader. In a particular crowd perhaps I might have adapted my system to the conditions immediately before me. But, of course, if I had got to operating on such a scale as I do now, for instance, the system would have equally failed me, on account of the effect of my own trading on prices.

In short, I did not know the game of stock speculation. I knew a part of it, a rather important part, which has been very valuable to me at all times. But if with all I had I still lost, what chance does the green outsider have of winning, or, rather, of cashing in?

It didn’t take me long to realise that there was something wrong with my play, but I couldn’t spot the exact trouble. There were times when my system worked beautifully, and then, all of a sudden, nothing but one swat after another. I was only twenty-two, remember; not that I was so stuck on myself that I didn’t want to know just where I was at fault, but that at that age nobody knows much of anything.

The people in the office were very nice to me. I couldn’t plunge as I wanted to because of their margin requirements, but old A. R. Fullerton and the rest of the firm were so kind to me that after six months of active trading I not only lost all I had brought and all that I had made there but I even owed the firm a few hundreds.

There I was, a mere kid, who had never before been away from home, flat broke; but I knew there wasn’t anything wrong with me; only with my play. I don’t know whether I make myself plain, but I never lose my temper over the stock market. I never argue with the tape. Getting sore at the market doesn’t get you anywhere.