You know, and I know that human nature is like the leopard that can’t change his spots. Even armed with all the latest findings into the inner workings of our psyche, it seems to provide scant help-certainly when we need it the most. I don’t know about you, but it seems like a lot of people are crying foul when it comes to the market-like it’s a rigged game. I asked Jesse about that issue:
“Get the slips of the financial news agencies any day and it will surprise you to see how many statements of an implied semi-official nature they print. The authority is some “leading insider’ or a “prominent director” or “a high official” or “someone in authority” who presumably knows what he is talking about…Quite apart from the intelligent study of speculation everywhere the trader must consider certain facts in connection with the game in Wall Street. In addition to trying to determine how to make money one must also try to keep from losing money. It is almost as important to know what not to do as to know what should be done. It is therefore well to remember that manipulation of some sort enters into practically all advances in individual stocks and that such advances are engineered by insiders with one object in view and one only and that is to sell at the best profit possible.”
So, is it not true that the more things change, the more they remain the same? What about all the talk about the retail investor leaving the market for good-because it’s not a level playing field? Do they not detest their own gullibility? Again, from Livermore:
“The public always wants to be told. This is what makes tip-giving and tip-taking universal practices…The trader must look far ahead, but the broker is concerned with getting commissions now; hence the inescapable fallacy of the average market letter. Brokers make their living out of commissions from the public and yet they will try to induce the public through their market letters or by word of mouth to buy the same stocks in which they have received selling orders from insiders or manipulators. Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics the one thing that strikes you most forcibly is how little either stock speculation or stock speculators to-day differ from yesterday. The game does not change and neither does human nature.”
There was a question gnawing at the edge of my mind. I suspect that you would ask the same question-if you were here. I had to know why so many traders seemed to be frightened out of their positions, generally hours before a turn-around.
“I sometimes think that speculation must be an unnatural sort of business, because I find the average speculator has arrayed against him his own nature. The weaknesses that all men are prone to are fatal to success in speculation-usually those very weaknesses that makes him likeable to his fellows or that he himself particularly guards against in those other ventures of him where they are not nearly so dangerous as when he is trading in stocks or commodities… The speculator’s chief enemies are always boring from within. It is inseparable to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day-and you lose more than you should had you not listened to hope-to the same ally that is so potent a success bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out-too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. 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. It is absolutely wrong to gamble in stocks the way the average man does
