Reminiscences of a Stock Operator

The story opens with a fourteen-year-old fresh out of grammar school, hired to chalk prices onto the big board in a brokerage office. A customer by the ticker called the numbers out, and the boy posted them. They never came too fast for him.

The book calls him Larry Livingston, a thin disguise for Jesse Livermore, and the first thing he tells you is odd. The prices on that board did not mean dollars per share to him, or companies, or fortunes. He saw only that they kept changing, and he says flatly that he did not know or care why.

That indifference is where everything starts. Before he owned a single share, he had trained himself to watch the behaviour of prices the way other boys watched a ball game, for five hours a day and two on Saturdays.

Watching turned into noticing. Prices, he found, had habits. Before a stock went up or down it tended to act in recognisable ways, and he could remember in detail how it had acted the day before it moved.

His language comes straight from the racetrack. He carried the dope sheets in his head, expected prices to run on form, and had clocked them the way a tout clocks a horse. After hundreds of these observations he began testing them, comparing today's behaviour with other days, and soon he was anticipating moves.

Notice what he did not have: no news, no balance sheets, no theory of value. His only guide was past performance. He even puts a number on it, claiming the method held in about seven cases out of ten, which is a long way from a sure thing.

What did the young quotation-board boy use to anticipate where a stock's price would go?

• His estimate of what each company was worth
• How the price had behaved before similar moves✓Correct answer
• Tips from customers who sat by the ticker
• Company news and dividend announcements

He says his only guide was the stocks' past performances: the habits prices showed before they rose or fell. He knew nothing about the companies and did not care why prices changed, so news and value played no part.

Out of those early months came a lesson he says he never forgot: there is nothing new in Wall Street. Speculation is as old as the hills, so whatever happens in the market today has happened before and will happen again.

This is not a shrug. It is the reason his method could work at all. If price behaviour were new every morning, a memory full of yesterday's patterns would be useless. Because people hope, fear and chase in the same ways over and over, the patterns come back.

He describes his memory as his way of capitalising experience. Other people had seen the same markets and forgotten them. He kept a mental ledger of when and how each thing had happened, and treated that ledger as capital, something that could be put to work.

Then he got a little book and started writing his observations down. This detail matters more than it looks.

He is careful to say what the book was not. It was not a record of imaginary trades, the kind people keep to make or lose millions on paper without any consequences. It was a record of hits and misses. After predicting a movement, the thing he cared about most was checking whether he had observed accurately, or as he puts it, "whether I was right."

A paper portfolio asks how much you would have made. His notebook asked a harder question: was the reading correct? One flatters you with imaginary profits; the other catches you every time your eye was wrong.

The routine was simple and strict. After studying every fluctuation in an active stock, he might decide it was behaving the way it always did before a break of eight or ten points. On Monday he jotted down the stock and its price, and wrote what it ought to do on Tuesday and Wednesday.

Later he checked those predictions against the actual prices from the tape. No room to wriggle: the stock either did what he wrote or it did not.

He kept this up for about six months, staying on after work instead of going home, looking for repetitions in how prices behaved. He adds that he was learning to read the tape without knowing it. Nobody taught him. The notebook, checked honestly, did the teaching.