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Reminiscences of a Stock Operator
losses to another set of ignorant outsiders who might buy in the hope of making money.
I am not telling you this to moralise on the public's losses through their buying of
Guiana or on my profit through my selling of it, but to emphasise how important the
study of group-behaviourism is and how its lessons are disregarded by inadequately
equipped traders, big and little. And it is not only in the stock market that the tape warns
you. It blows the whistle quite as loudly in commodities.
I had an interesting experience in cotton. I was bearish on stocks and put out a moderate
short line. At the same time I sold cotton short; 50,000 bales. My stock deal proved
profitable and I neglected my cotton. The first thing I knew I had a loss of $250,000 on
my 50,000 bales. As I said, my stock deal was so interesting and I was doing so well in
it that I did not wish to take my mind off it. Whenever I thought of cotton I just said to
myself: "I'll wait for a reaction and cover." The price would react a little but before I
could decide to take my loss and cover the price would rally again, and go higher than
ever. So I'd decide again to wait a little and I'd go back to my stock deal and confine my
attention to that. Finally I closed out my stocks at a very handsome profit and went away
to Hot Springs for a rest and a holiday.
That really was the first time that I had my mind free to deal with the problem of my
losing deal in cotton. The trade had gone against me. There were times when it almost
looked as if I might win out. I noticed that whenever anybody sold heavily there was a
good reaction. But almost instantly the price would rally and make a new high for the
move.
Finally, by the time I had been in Hot Springs a few days, I was a million to the bad and
no let up in the rising tendency. I thought over all I had done and had not done and I said
to myself: "I must be wrong!" With me to feel that I am wrong and to decide to get out
are practically one process. So I covered, at a loss of about one million.
The next morning I was playing golf and not thinking of anything else. I had made my
play in cotton. I had been wrong. I had paid for being wrong and the receipted bill was
in my pocket. I had no more concern with the cotton market than I have at this moment.
When I went back to the hotel for luncheon I stopped at the broker's office and took a
look at the quotations. I saw that cotton had gone off 50 points. That wasn't anything.
But I also noticed that it had not rallied as it had been in the habit of doing for weeks, as
soon as the pressure of the particular selling that had depressed it eased up. This had
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