I’ve also finished Reminiscences of a Stock Operator. Although the book is extremely detailed and recounts nearly every speculative move its protagonist makes, there are some very important things to take away from it.

The quotes below share a common backbone: the fact that speculation is a struggle far more with one’s own inner world than with the world outside. Throughout the book, the narrator shows again and again that the cause of losing is usually not a wrong forecast but wrong behavior. Clinging to a losing position, cutting profits short, taking refuge in someone else’s opinion, feeling “compelled to do something,” or holding on to hope… All of these are mistakes born not of failing to beat the market, but of failing to beat oneself. That is why the market neither delivers moral lessons nor offers consolation; it simply announces the result. Prices reward not the one who is right or well-intentioned, but the one who acts correctly at the right time. This is why the author learns not to be ashamed of his mistakes, but to see them as “tuition.” What is truly devastating is not losing money but being wrong, because being wrong gnaws away at a person’s ego, self-confidence, and judgment. In the book, speculation is separated from gambling by a sharp line: gambling rests on hope, while speculation rests on discipline, observation, and patience. Without recognizing one’s own weaknesses, without learning to swap fear for hope and hope for fear, a person is doomed to lose in the long run, no matter how intelligent they may be.

Another strong theme of these quotes is the idea that the general trend always matters more than individual stories. The author chooses to look at what prices are doing rather than question why, because the market is always right and there is no arguing with it. The real money is made not from small fluctuations but from the big moves. And that requires patience, timing, and, more often than not, knowing how to “do nothing.” Tips, rumors, charismatic people, or fancy rationalizations are an investor’s greatest enemies, because they pull a person away from their own thinking. The successful speculator acts on his own plan rather than on someone else’s mind, and only adds to his position when prices confirm that he is right. And the moment he realizes he is wrong, he pulls back without stubbornness. This perspective turns Reminiscences of a Stock Operator from merely a book about the stock market into a harsh but honest text on human nature. The essence of the book is this: no one can beat the whole game in the market, but if a person learns to beat themselves, they can stay standing in the long run. And that is where the profit comes from anyway; from building one’s own inner discipline before turning to prices.

Before getting to everything I underlined in the book, I’m sharing the ones I personally consider the most important. After that, you can find every quote I found significant while reading:

• “People who can both make the right call and patiently sit tight are rare. It is not easy to learn. But the only way to make money in the market is to acquire this skill.”
• “Another lesson I learned at a young age is that on Wall Street, everything is always the same. It is the same because speculation is as old as the world. Whatever happens in the market today has happened before and will surely happen again in the future.”
• “A speculator’s greatest enemy lies within himself. Hope and fear are inseparable parts of human nature. (…) A successful trader must fight these two powerful emotions and be able to reverse what we call these two natural impulses. Instead of hoping, he must fear; instead of fearing, he must hope.”
• “In the market, it is not the small plays that bring the real profit, but the big general moves.”
• “There is the ordinary fool, who does everything in the wrong place at the wrong time; and then there is the Wall Street fool, who thinks he must always be buying or selling something. No one can have the luck or the knowledge to buy and sell stocks every single day without stopping.”
• “If I buy stocks on a tip from Smith, I have to sell those stocks on a tip from Smith too. Then I become dependent on Smith. (…) No one can get rich by relying on something they heard from someone else.”
• “Losing money doesn’t upset me. I forget it overnight. But being wrong—now that is the thing that eats a person alive.”
• “To put it simply, we can say that prices move in the direction where they will meet the least resistance. Whichever way is easiest for them, that is the way they will go.”
• “Regrets pay no dividends in the market.”

The passages I found most important from the book as a whole:

• “I did exactly the wrong thing. The cotton was showing a loss, and I didn’t sell it. The wheat was showing a profit, and I went and sold that.” “A man can make plenty of blunders in the market, but the greatest of all is to keep losing with your eyes wide open. Remember, cutting a loss at any point is a gain.”
• Another lesson I learned at a young age is that on Wall Street, everything is always the same. It is the same because speculation is as old as the world. Whatever happens in the market today has happened before and will surely happen again in the future. I have never let that slip from my mind.
• Of course, fluctuations don’t happen without reason, but the tape doesn’t ask why or how. It explains nothing. I never asked the reason for these ups and downs when I was fourteen, and I don’t ask today at forty either.
• To me, the most enjoyable part of the market is being proven right by using your head.
• If I have ten dollars in my pocket and I risk all of it, that means I am braver than the man who has millions in the bank and risks one million of it.
• I never do anything blindly. It’s not my nature. It never has been. Even as a child, I wanted to know the reason for everything I did.
• What caused me to lose was abandoning my original plan—that is, ceasing to check whether the market’s signals fit the situation. There is a time for everything, but back then I didn’t know that. This is exactly what separates the winners from the losers on Wall Street. There is the ordinary fool, who does everything in the wrong place at the wrong time, and then there is the Wall Street fool, who thinks he must always be buying or selling something. No one can have the luck or the knowledge to buy and sell stocks every single day without stopping. I am living proof of that. When I read the tape in the light of my experience, I made money; when I acted purely on my emotions, I lost. I was just like everyone else. The quotation board stood right in front of me; people were watching the prices coming off the tape and, in the meantime, witnessing the tickets in their hands turn into either money or a scrap of paper. Every now and then I got carried away by that excited atmosphere too.
• Remember, I was still just a kid. In those days I didn’t have the mind I have today, whereas fifteen years later I would watch a stock I felt was going to rise climb thirty points over the course of two weeks, and only then, believing the stock was safe, would I buy.
• I never lose my composure in the market. I never claim that what the tape tells me is wrong. You can’t get very far by being angry at the market.
• And then I would never have learned that stock speculation is not merely a matter of playing fluctuations of a few points.
• It takes a long time for a person to learn to draw lessons from painful experiences. Every coin has two sides. But the securities market has only one side; what matters is not whether the market rises or falls, what matters is being able to read the market correctly. For some reason, understanding this took me much longer than learning the more technical aspects of speculation.
• This reminds me of the story of a man who was going to fight a duel the next day. His second asked him, “Are you a good shot?” The man replied quite modestly: “I can hit the stem of a wineglass from twenty paces.” The other, without batting an eye, replied: “That’s all well and good, but can you still hit that wineglass while it’s holding a loaded pistol to your head?”
• The losses I have suffered so far have taught me not to go on the attack until I am sure I won’t be forced to retreat.
• If you intend to win this game, you must trust yourself and your ability to make decisions. That’s why I don’t believe in the thing called a tip. If I buy stocks on a tip from Smith, I have to sell those stocks on a tip from Smith too. Then I become dependent on Smith. What if Smith is on vacation when it’s time to sell? No! No one can get rich by relying on something they heard from someone else.
• Besides, even if someone had come and told me my method wouldn’t work here, I wouldn’t have listened; I would have tried it myself anyway. I only believe I’ve made a mistake when I lose money. And I’m only sure I’m right when I make money. That is what speculation is.
• Prices were going to tumble suddenly, and then we would be able to buy very solid stocks at very good prices. The market would recover before long, and in the meantime those who knew how to pick the right stock would make plenty of profit.
• If I think I should sell, I sell. If I think stocks are going to go up, I buy. What saved me was following this general principle of speculation. If I had been forced to buy within certain limits, everything would have been a bad copy of my old bucket-shop method adapted to a broker’s office. I would never have learned what stock speculation is; I would have just done whatever my gut told me on the strength of my brief experience.
• Still, what bothered me most was not giving up this life, but constantly being wrong in my predictions about the market.
• “He who makes his customers rich gets rich” is an old and very true saying, but these men seemed never to have heard it; they wouldn’t give up their lies and tricks.
• But now I knew the reason. It was because I kept making ill-timed trades; whenever my system, based on research and experience, didn’t work, I went and gambled blindly. I wasn’t sure of myself; I was leaving things to chance.
• There is something I call the behavior of a stock, and it has to do with whether a stock keeps up the behavior it has shown in the past. If a stock is behaving inconsistently, the best thing is to stay away from it, because since you don’t know what is wrong and where, you can’t know what price the stock will reach in the future either. If you can’t diagnose the stock’s illness, there can be no cure.
• But now I understand that the real mistake was that I had confused stock speculation with gambling.
• In a market that is expected to rise, greenhorns, not knowing the rules of the market, buy blindly and leave things to chance.
• “All right, I know as well as you do that the market is going up. But right now is exactly the time to sell the stock you’re holding and buy it back once the price drops. You’ll come out ahead.” “My boy,” said Partridge, and it was obvious how distressed he was—“my boy, if I sold that stock now, I’d lose my chance to make more profit.” Elmer Harwood shook his head and turned toward me. It was clear he expected sympathy from me. “What can I say?” he whispered in my ear. “What do you say to that?” I chose to keep quiet. He went on: “I gave him a tip on Climax Motors. He went and bought five hundred shares. He made seven points, and then, when I told him to sell the shares and get out ahead of the drop that was long overdue, what does he tell me? That if he sells now he can’t make a profit. What do you say to that?” “Excuse me, Mr. Harwood, I didn’t say I couldn’t make a profit. I said I’d lose my chance to make more profit,” old Turkey interjected. “When you reach my age and have been down the roads I’ve been down, through the panics I’ve weathered and the ups and downs, you’ll understand. Don’t miss the chance to make more profit; nobody can afford that, not even John D. Rockefeller. I hope the stock goes down and you buy back what you sold at a better price, but I have to act on years of experience. That experience has cost me a great deal, and I don’t want to start everything over from scratch one more time. But believe me, I’m very grateful to you. It’s a bull market, you know.” Then he turned and walked away, leaving Elmer staring after him with eyes full of astonishment. I couldn’t quite understand what Mr. Partridge said at the time, but when I couldn’t make enough money even though my predictions about the market came true, I thought about his words once more. The more I thought about it, the better I understood how clever that old man was. He, too, had made the same mistakes when he was young, and he knew himself very well. He didn’t easily give in to the weaknesses he knew were harmful to him, and so he steered clear of costly regrets. Understanding what Mr. Partridge meant by “It’s a bull market, you know” was a very important and instructive step for me. What he meant was that the real profit comes not from small fluctuations but from the fundamental movements of the market—in other words, that one must look not at the prices coming off the tape, but at the general conditions and the trend of the market.
• People who can both make the right call and patiently sit tight are rare. It is not easy to learn. But the only way to make money in the market is to acquire this skill.
• If the market is rising, you first buy stocks, and after a while, when the expectation of a decline sets in, you sell them. To do this, you need to pay attention to general conditions and ignore special factors concerning individual stocks, or tips. The moment you feel a general decline is coming in the market, sell every stock you hold and then wait for conditions to reverse. To be able to do this, you have to be intelligent and far-sighted; otherwise what I’m saying can be taken as a piece of simplistic advice like “buy low, sell high.”
• Someone who can’t trust his own decisions can’t succeed in the market. There is only one thing I’ve learned in all these years in the market: study the general conditions, buy certain stocks, and then don’t let go of them easily. I’ve now learned to wait without showing even a single sign of impatience. When I see a stock’s price drop, I don’t panic at all, because I know it’s temporary. Once, I had gone short a hundred thousand shares. I knew the market was going to start rising again very soon. I was also aware that this rally would bring me a million dollars in profit on paper. Still, I waited without flinching and watched half of my paper profit get wiped out. Meanwhile, it never even crossed my mind to get out of my short position and cover. I knew that if I did, I would lose my position, and that this would stand in the way of my future profits. In the market, it is not the small plays that bring the real profit, but the big general moves.
• I told some of these stories to my friends, and they told me that these feelings were not intuition but a manifestation of my constantly active subconscious, that is, the creative mind. It’s this subconscious that makes artists do certain things without realizing it. Perhaps in my case it was an accumulation, a combination of factors that were unimportant on their own but that affected me when they came together.
• Besides, when the market is high, the public never makes decisions based on news of disasters. If the market has a downward tendency, the situation changes; then disasters accelerate the decline.
• Not only did I learn to disregard tips and stand by my own thinking, but my self-confidence grew, and I shed the last remnants of my old trading method. The Saratoga experience was the last episode of arbitrary trial and error. From that day on, I started looking at the general climate of the market instead of at individual stocks. In this way, I moved up a grade in the school of trading. But it was a long and difficult stage for me.
• If there is a general decline in the market, the prices of all stocks fall; if there is a general rise, they go up. But let’s say there is a war going on and the market has fallen because of it; that doesn’t mean arms stocks will fall too. I’m talking about general situations. But the average investor isn’t interested in the general rises or declines of the market. This investor wants to know which stock he should sell or buy. His intention is to get something for nothing. He wants to lie back and take it easy. He doesn’t want to tax his brain too much. Even counting the money he finds on the ground feels like a chore to him.
• What matters is not being able to catch prices at their lowest point, but being able to buy or sell at the right moment. If I think the market is going to fall and I’ve started selling, every sale I make should go through at a lower price than the one before. If I’m going to buy, the opposite applies. Prices must keep rising. Buying as prices rise and selling as they fall is my method. Let’s say I’m going to buy a stock, and I bought two thousand shares at 110. If the stock’s price goes up to 111 after I buy, then, at least for the moment, I’m right in the trade I made; since the price has risen a point, I count as having a profit, and because I have a profit I go and buy two thousand more shares. If the market is still rising, I make another purchase of two thousand shares. Let’s say the price goes up to 114. For the moment I think that’s enough. Now I’ve got a base position in the stock. I’ve bought six thousand shares at an average of 111 3/4, and the price is currently 114. For the moment I don’t want to buy any more. I sit and wait. I figure the price will surely drop at some point. I’m curious to see how the market will recover the price after that drop. In all likelihood, this drop will come after the third purchase I made. Let’s say the price will drop from 114 to 112 1/4 and then rise again. The moment the price gets back up to 113 3/4, I place an order to buy four thousand shares. If I can get those four thousand shares at 113 3/4, I know something is wrong, and I decide to make a test sale—that is, I put a thousand shares up for sale and watch how the market reacts to it. But let’s say that after the four-thousand-share buy order I placed at 113 3/4, I’m able to get two thousand shares at 114, five hundred at 114 1/2, and the rest at higher prices, paying 115 1/2 for the last five hundred. Now I know for certain that I’m right. The conditions under which I buy the stock show me whether I’m right to be buying that stock at that moment—assuming, of course, that in the meantime I have thoroughly assessed the general state of the market and that the market is in an upward trend. I never want to buy any stock too cheaply or too easily.
• The president began to explain: “My friend, I never doubted for a moment that you were telling me the truth. But even if H. O. Havemeyer himself had given you this news, I would have done the same thing. There really is only one way to find out whether H. O. Havemeyer and his associates are buying those shares the way you say, and that is to do what I did. The first ten thousand shares sold quite easily. But that didn’t tell me much about the situation. The second ten thousand went instantly, and the market kept rising all the while. So somebody was ready to snap up every share that was sold. Who those buyers are doesn’t matter much right now. I’ve now covered my short position, I’m holding ten thousand shares, and I believe the information you gave me is correct.”
• If you are making large, long-term purchases, never let this slip your mind. An investor first studies the general conditions, then makes himself a plan, and then acts. Let’s say his plan works out and he makes a big profit—but on paper. This investor can’t sell his shares whenever he feels like it. It will be much harder for the market to absorb fifty thousand shares than a hundred. This investor has to wait until a market forms for him. Then he notices that a crowd of buyers has formed for his shares. He must reach that crowd immediately. He has already been waiting for a while anyway. He has to sell his shares not when he wants to, but when he can.
• But if you haven’t made a profit after the first trade, never enter a second one. Choose to wait. At this point, watch prices very closely; that’s how you’ll know when to start the next trade. Everything depends on the right timing. It took me many years to understand its importance. It also cost me hundreds of thousands of dollars.
• The Union Pacific incident I went through at Saratoga in the summer of 1906 thoroughly put me off tips and idle talk; that is, it taught me not to listen to other people’s opinions and predictions, no matter how well-meaning and experienced they may be.
• Getting angry at the market because it moved when you least expected it, and in a way that defies your logic on top of that, is like getting angry at your lungs because you caught pneumonia.
• Naturally, the best thing is to buy stocks in a rising market and sell as the market falls. It sounds all too simple, doesn’t it? But understanding this principle isn’t enough; when applying it, you have to take many possibilities into account. It took me a long time to learn to trade according to this basic principle.
• If a man never made a mistake, he could take over the world within a month. But if he doesn’t learn from the mistakes he makes, he won’t have a thing to his name.
• According to a theory I came up with long ago, when a stock crosses the 100, 200, or 300 mark for the first time, the price doesn’t stop at the round number but keeps going higher, so if you buy the stock as soon as it crosses that line, you’re sure to make a profit. Cautious investors don’t buy a stock after it has hit a record price. But in the past I made a lot of money by applying this theory of mine.
• Money is earned only through work. To make a lot of money, though, you need to be right at the right time.
• But my biggest gain was something money couldn’t buy: I had been right, I had known how to look ahead, and I had acted according to a detailed plan. I had learned what I needed to do to make big money; I was no longer at the gamblers’ stage. I had finally learned to play the market using my head. It was an unforgettable day for me.
• Let me tell you something interesting: a trader can make a mistake knowing full well that he’s making a mistake. After making these mistakes, he’ll ask himself why he did it. After thinking calmly for a while, he may understand how, when, and at what point in the trade he committed these mistakes, but he will never understand why. He’ll be angry at himself, and then he’ll never think about the matter again.
• Losing money doesn’t upset me. I forget it overnight. But being wrong—now that is the thing that eats a person alive.
• A young, normal person quickly forgets the days when he was poor. But it may take him a little longer to forget the days when he was rich. The reason is that money creates new needs and multiplies the old ones.
• He deliberates over buying a cheap car, yet doesn’t pause even for a moment when putting half his fortune into the market.
• When watching the market—and by the market I mean the prices coming off the tape—you should have a single aim: to determine the price trend. As you know, prices move up or down according to the resistance they meet. To put it simply, we can say that prices move in the direction where they will meet the least resistance. Whichever way is easiest for them, that is the way they will go; that is, if there is little resistance to a rise they will go up, and if there is little resistance to a fall they will go down.
• An open-minded person who can see a little way ahead can easily spot this trend, but if someone perceives everything through the preconceptions in their head, it can be a bit difficult.
• A speculator is not an investor. His aim is not to earn a high rate of return on the money he puts in, but to profit from the rises or falls in the prices of the stocks he speculates in.
• And in practice, if you trade using the method I’ve described, you will see that the important news that spreads between the market’s close and its opening will always tell you something about which way the price is going to move.
• In periods when the market is stagnant and prices move only within narrow limits, there is no point in trying to guess which direction the next big move will take. What needs to be done is to watch the market, determine the lower and upper limits of prices, and then decide not to buy or sell until prices break out of those limits. The speculator’s job is to make money from the market, not to lock horns with prices and force them to move in the direction he has in mind. Never fight with prices, and never try to question why prices are at this or that level. Regrets pay no dividends in the market.
• While wheat was fluctuating within certain limits, I couldn’t explain why it was behaving that way. Nor could I predict in advance whether, when it broke out of those limits, the price would go above $1.20 or below $1.10. Though deep down I thought the price would rise, because there hadn’t been a wheat harvest anywhere in the world abundant enough to push prices down. As it turned out later, Europe had been quietly buying wheat from us, and many traders had gone short at around $1.19. Because of the purchases from Europe and some other reasons, a large amount of wheat had been withdrawn from the market, and finally the expected big move began. So the price crossed the $1.20 mark. That was the signal I had been waiting for. When the price passed $1.20, I understood that the rise beyond the limit was finally beginning. In other words, when the price passed $1.20, the direction of least resistance was determined as well. And so the course of the market changed too.
• Interestingly, many experienced traders are surprised when I tell them that I don’t hesitate to buy at a high price when buying stock, or to sell at a low price when selling, and that if necessary I don’t sell at all. If everyone bought or sold according to the course of prices and waited until the last line of resistance was broken, there would be no losers in the market. A good trader doesn’t play all his cards at once. He buys gradually and sells gradually. First he buys a fifth of what he intends to buy. If he hasn’t made a profit, he shouldn’t keep buying; that shows he has made a wrong move—at least for the moment, he is mistaken.
• ‘Nobody knows the winner until the race is over!’
• I sometimes think that speculation is an unnatural business, because when speculating in the market, a person has to fight against his own nature. People’s weaknesses eat them alive in the market. These are the weaknesses that make them human, that make them liked by others, and that are not at all dangerous outside the securities or commodity markets. A speculator’s greatest enemy lies within himself. Hope and fear are inseparable parts of human nature. When the market starts going against you, you always hope that each day will be the last, and because of that hope you lose a little more. Yet many a nation has survived thanks to hope, and hope has always brought statesmen the successes they achieved. And when the market starts going in your favor, you start to fear; you think, what if I lose tomorrow, and you sell your stocks before their time. Fear limits the gains you could have made. A successful trader must fight these two powerful emotions and be able to reverse what we call these two natural impulses. Instead of hoping, he must fear; instead of fearing, he must hope. He must fear that his loss may grow even larger, and hope that his profits may grow even more. The average person does exactly the opposite, and playing the market with that approach resembles a dangerous gamble.
• A man can beat a stock or a group of stocks at a given time, but never the whole market! A man can make a profit buying cotton or grain, but no one can beat the cotton or grain market. It’s like horse racing. A man can win a horse race, but never every horse race! I don’t know how to explain this to you any better. Don’t believe those who say otherwise. I know very well that what I’m saying is true and that no one can prove the opposite.
• When a person spends years in a business, he picks up certain habits of his own, whereas for novices the situation is entirely different. That’s the difference between professionals and amateurs. What determines whether you make a profit or a loss in the market is your way of looking at things. The public evaluates its own efforts from a superficial point of view. A person’s ego steps in at the first opportunity and prevents deep, thorough thinking. Professionals, on the other hand, are concerned with doing the right thing without thinking about the money, because they know that the moment they act correctly, the money will come on its own. A trader plays the game like a professional billiard player—that is, instead of focusing his attention on the first shot, he thinks long-term. This style of play becomes a habit.
• In Palm Beach, everyone was talking about the collapse of Thomas’s position in March cotton. You know how rumors spread as they pass from mouth to mouth: they get exaggerated, the facts get distorted, the news gets altered. When a rumor that started about me came back to the person who first started it within twenty-four hours, it had been so inflated, with so many details added, that even he had trouble recognizing it as the same rumor.
• I’m so used to making money that when I make a mistake, the first thing that comes to mind isn’t the money I’ve lost. I’ve always been interested in the game itself, in the reasons. First of all, I’m a person who questions his own limitations and habits. Secondly, I don’t want to fall into the same mistake twice. The only mistakes a person can be forgiven for are the ones he turns into profit by learning from them.
• It’s not easy to make a person give up what he believes, but it is easy to drive him into a feeling of uncertainty and indecision. And that is a worse thing, because then a person can’t play the market with self-confidence and peace of mind.
• This was the most foolish move of my career. Instead of succeeding or failing on the strength of my own observations and conclusions, I started acting on someone else’s ideas. I more than deserved what was coming to me. I didn’t really believe the market would rise, but I bought anyway—and what’s more, I didn’t even buy according to the method my experience had taught me. I wasn’t playing right. By listening to Thomas, I had signed my own death warrant.
• A man can make plenty of blunders in the market, but the greatest of all is to keep losing with your eyes wide open.
• Another lesson that cost me millions was seeing that a charismatic person can sway anyone with persuasive talk, and that this is one of a trader’s greatest enemies. Unfortunately, I could have learned the same lesson by losing only a million dollars. But what can you do—sometimes fate sets the price of the lesson. Fate teaches you your lesson and then hands you the bill, and you have to pay it, whatever the amount.
• Most of those who are determined to make a living from the market gradually use up everything they have.
• On Wall Street, you won’t find a single person who played the market to buy a car, a bracelet, a motorboat, or a painting and didn’t lose.
• What does a person do when he tries to make money from the market for a sudden need? He gives himself over to hope. He gambles. So he takes risks he would never take when speculating with his intelligence, and he forgets that he needs to study the general conditions of the market with a cool head.
• If a person wants to make money in the market, he must know himself very well. Realizing how foolish I could be was a very important step for me. I sometimes think that, whatever the cost, every lesson that makes a person act more wisely in the future is useful. Many people make big mistakes because they are blinded by their own successes. Getting carried away by the spell of success is a very expensive disease for everyone, everywhere—and especially on Wall Street.
• Someone once told me that James Stillman, the former president of the National City Bank and also a very close friend of Williamson’s, would listen to anyone who brought him any proposal without saying a word, with an expressionless face. After the person finished speaking, Stillman would keep looking at him as if he hadn’t finished. So the other person, feeling he needed to say a bit more, would add something else. Just by listening to the person in front of him and looking at him, Stillman could get more than he had expected. In this way, he made very advantageous deals for his bank.
• A sensible person is grateful to those who do him favors, but doesn’t let that feeling tie his hands.
• The loss didn’t upset me. Whenever I lose money in the market, I consider that I’ve received a lesson in return. If I’ve taken a loss, I’ve gained experience in exchange; in other words, I’ve actually used the money I lost as tuition. A person keeps gaining experience and has to pay for it.
• I had learned that a trader’s weaknesses know no limit. My attitude toward Dan Williamson was conduct befitting a gentleman, but acting against one’s own decisions was not at all befitting a real trader. There is no room for obligatory courtesy in the market, because prices reward not noble behavior but sound decisions. Still, I knew I couldn’t have acted differently. I couldn’t trample over the person in front of me just so I could get into the market. But business is business, and my business as a speculator always depends on my own decisions.
• Besides studying the general conditions of the market, keeping the past performance of stocks in mind, and taking into account the psychology of the public and the limitations of his brokers, a trader must know himself very well and know how to resist his own weaknesses.
• Then, all of a sudden, while I was getting a little closer to a fortune with every passing day, the Lusitania incident happened and prices fell. Every now and then, events like this are good for bringing a person back to his senses. No one can know exactly what the market will bring; you always have to allow a margin for accidents. Some say the torpedoing of the Lusitania didn’t shake professional traders much, that they had heard the news long before it spread through Wall Street.
• sometimes a person can’t help making money, just as it’s impossible to go out in the rain without an umbrella and stay dry.
• During a general rise in the market, all prices keep climbing. So if a stock goes against the general trend, it’s assumed this stems from something negative specific to that stock. An experienced trader immediately senses that something is wrong. He draws conclusions from the way prices are moving, takes the warning before the market’s alarm bells ring, and sells the stock he holds.
• Another thing that must not be forgotten is this: never try to sell a stock when its price is at its highest. That’s not a wise move. Sell after waiting for the stock to fall back a few points.
• As I’ve said before, when the market starts falling and the public’s morale collapses completely, the best strategy is to buy stock as soon as possible and cover your shorts.
• After paying off all my debts, I put a sizable portion of my money into stocks that would provide me with a regular income. I was determined never to be broke again, never to live without any security or capital. Of course, after I got married I set up a fund for my wife. After our son was born, I did the same for him. The reason I did this wasn’t a fear of losing my money to the market, but knowing that a person can spend every last penny he has without batting an eye. By setting up these funds, I protected my wife and child from myself.
• Life is a gamble from the cradle to the grave, and since I have no sixth sense, I know I have to accept whatever happens to me. Still, during my life in the market, there were times when, despite making sound decisions and taking careful steps, I lost money because of the unfair play of some dishonest rivals.
• I look only and solely at the facts and plan my moves accordingly. That is also how Bernard M. Baruch gave his recipe for wealth.
• As I’ve said a thousand times before, no manipulation can push stock prices down and keep them down. This isn’t hard to understand at all. Anyone who bothers to think about it for half a minute can grasp the reason. Let’s say a trader pushes a stock’s price below its real value; what happens next? First of all, this person will be playing right into the hands of those who want to buy the stock. Those who know the stock’s value will certainly want to buy it while it’s selling at a low price. If no buyers show up, that means the general conditions of the market are negative and there is an expectation of a general decline. Deliberately holding a price down is frowned upon in the market; it’s viewed almost as a crime. But selling a stock at a price far below its real value is a dangerous business. If the price of a stock that is being deliberately held down—that is, one that has been unfairly sold short—isn’t rising, it means it can’t find buyers; when a buyer appears, the price rises right away. Let me say this much: in ninety-nine percent of the cases where prices are alleged to have been held down by unfair means, the decline happened naturally.
• People believe tips not because they are stupid, but because they let themselves get carried away by hope. Baron Rothschild supposedly had a secret that helped him profit in the market. Someone asked him whether it was hard to make money in the market, and he said it was very easy. The person who asked said, “It seems easy to you because you’re already very rich.” “Not at all. I found the easy way, and I don’t stray from it. It’s impossible not to make money this way. If you like, I’ll tell you my secret. My secret is this: I never buy a stock when the price is at its lowest, and I always sell early.”
• He also explained what had driven him to sell his shares. “While Reinhart was telling me about the state of the company, he pulled some letter paper out of his desk drawer to write down the figures. The paper he used was extremely high quality, with a two-color embossed letterhead. This paper was very, very expensive. He wrote a few figures on the paper and told me how much profit certain departments of the company were making and how they had cut expenses and operating costs. Then he crumpled up that beautiful sheet and threw it in the wastebasket. A moment later, to explain a new method they were implementing, he pulled out another fresh sheet with the two-color letterhead. After writing a few figures, that sheet ended up in the wastebasket too. So much money wasted without a moment’s thought. If the president is like this, I thought, who knows what the people working under him are like. So instead of believing the president, I decided to believe those who had told me how wasteful he was, and I sold all the Atchison I had. By coincidence, a few days later I had to go to the offices of Delaware, Lackawanna & Western. In those days the president was Sam Sloan. His office was the room right next to the entrance, and its door was wide open. His door was always open. Anyone who walked into D. L. & W.’s head office could see the president of the company sitting at his desk. Anyone who wanted to could go and take up their business directly with him. Financial reporters say they could talk to Sam Sloan directly, ask him questions without beating around the bush, and get a clear yes or no answer from him whatever the situation in the market. When I went into Sloan’s office, I saw that he was busy. At first I thought he was opening his mail, but when I got closer to his desk I realized what he was doing. I later learned that this was his daily habit. After the letters arriving at the office were sorted and opened, instead of being thrown away, the empty envelopes were brought to Sloan’s office. In his spare minutes, he would tear the edges off the envelopes. That way he would get two pieces of paper, blank on one side. He would collect these papers and then hand them out to the office staff, having them use them as notepaper in place of the letterhead Reinhart had used for me. Neither the empty envelopes nor the president’s time went to waste. You see, a use was found for everything. If D. L. & W.’s president is like this, I thought, every department of the company must surely be run economically; Sloan must be seeing to that. Of course, I knew the company paid regular dividends and had plenty of real estate. I bought as much D. L. & W. stock as I could get. Since then, the stock’s value has doubled and then quadrupled. Now I receive nearly as much in annual dividends as the money I first invested. I still hold my D. L. & W. today. As for the Atchison company, it changed hands shortly after its president tossed sheet after sheet of letterhead into the wastebasket to prove to me that he wasn’t wasteful.” This is a true story, and D. L. & W. is the best investment that Pennsylvanian made in his entire life in the market.
• The training of a trader resembles a medical education. The would-be doctor has to study for many years and learn many subjects such as anatomy, physiology, and pharmacology. First he grasps the theory, and then he devotes his life to putting it into practice. He observes every kind of pathological case and classifies them. He learns to make a diagnosis. If his diagnoses turn out right—which is only possible if his observations are complete—he will succeed in treatment as well. But he always has to keep in mind that a person can be wrong and that some unexpected events can affect the outcome. Then, little by little, he gains experience; he learns not only to do the right things but to do them in time, so much so that people who aren’t doctors start to believe he is acting on some sort of instinct. But the doctor doesn’t do this automatically. Because he has encountered and diagnosed the same illness many times over the years, he chooses whatever treatment is most suitable based on his experience. You can pass on your knowledge, that is, the things you learned from books, to others, but you can’t pass on your experience. An investor may know very well what he needs to do, but as long as he doesn’t apply what he knows in time, he won’t escape losing money.
• Thanks to years spent in the market, hard work, and a good memory, a trader will know how to act in the face of both what he expects and what he doesn’t.
• For instance, I should point out that my memory and mathematics are of enormous importance to me. On Wall Street, money is made mathematically. That is, the market runs on certain facts and figures.
• Experience is what pays a person the highest dividends in the market, and observation is the best tip. Sometimes the only information you need is the direction a certain stock’s price is taking. That has to be observed. Then your experience will show you how you can make money from departures from the normal—that is, from the probable. For example, we all know that stocks don’t all move together, but if there is a general rise or fall in the market, certain groups of stocks will move in that direction.
• Although it has been disproved hundreds of times in practice, in theory it is taken as certain that these stocks will eventually meet at the same place, and so when C. D. Steel and X. Y. Steel are rising and A. B. Steel hasn’t risen yet, the public rushes to buy the latter. Even if a general rise is expected in the market, I won’t buy a stock if it isn’t behaving as it should. Sometimes, when a rise in prices is only a matter of time, I buy a stock and then sell it because the prices of the other stocks in its group aren’t going up. Why? Because my experience has shown me that I shouldn’t go against group tendencies. One can’t always act on hard facts.
• I don’t need an overly complicated reason. I’m a trader, and for me a single sign is enough: is the company’s own management buying the stock? They weren’t. Why the management didn’t want to buy the stock as the price fell was of no concern to me. The fact that they were making no special effort to push the stock’s price up was enough for me.
• In his book Speculation as a Fine Art, the author writes that for a trader, being courageous means being able to stand firm on the decisions he makes. As for me, I’m not afraid of being wrong, because I don’t consider myself wrong until I’ve been proven wrong.
• If I’m going to succeed, it should be thanks to my own knowledge. If I’m going to fail, that too should be because of my own mistakes.
• Knowledge is power, and power need not fear lies, even when those lies are posted on the market’s quotation board. It will soon come out that they are lies anyway.
• The secret of success in the market rests on the principle that people will make the same mistakes in the future that they made in the past.
• He who sells what isn’t his own must buy it back or go to prison.
• He was one of those rare people who could change his position the moment he realized he was wrong.
• Take a look at the financial news the agencies put out; you’ll see that most of it consists of tips issued by semi-official mouths. Why didn’t he give his name?
• Knowing what not to do is as important as knowing what to do.
• In times of a general rise in the market, especially during boom periods, the public makes a profit, and then suffers losses because it doesn’t know how to sell its stocks in time.

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A successful trader must fight these two powerful emotions… Instead of hoping, he must fear; instead of fearing, he must hope. He must fear that his loss may grow even larger, and hope that his profits may grow even more.