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This One Setup Changed My Trading Forever | Jesse Livermore — Transcript

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0:00I lost everything three times, not once,
0:03not twice, three times. And the third
0:06time I had already been the richest man
0:08on Wall Street. I had already made more
0:10money in a single day than most men make
0:13in 10 lifetimes. I had already broken
0:16banks, moved markets, and made the
0:19newspapers write about me like I was
0:21some kind of God. And still, uh before
0:24you sit there and think this video is
0:25going to be another motivational speech
0:27about winning, let me stop you right
0:30there. This is not that. This is the
0:32story of the one setup, the one pattern,
0:35the one moment of truth that I wish
0:38someone had sat me down and explained
0:40before I ever placed my first trade.
0:42Because if someone had, maybe the story
0:45ends differently. My name is Jesse
0:47Lauriston Livermore. They called me the
0:49boy plunger. They called me the great
0:52bear of Wall Street. They called me a
0:54genius. They called me a villain. I've
0:57been bankrupt, and I've been worth over
0:59100 million dollars. I've sat in bucket
1:02shops as a teenager reading ticker tape
1:04on the wall, and I've sat in my private
1:07office on Fifth Avenue with a staff of
1:09traders executing my orders across every
1:12exchange in the country.
1:14But none of that matters right now. What
1:16matters is this. There was one setup,
1:19one specific, almost invisible alignment
1:21of price, time, and psychology that
1:24every single one of my great trades came
1:26from. And there was one specific failure
1:29of character, one human weakness that
1:31destroyed every fortune I ever built. If
1:34you understand both of those things by
1:36the end of this video, you will know
1:38more about trading than 95% of the
1:41people who have ever sat in front of a
1:43ticker tape or a screen. So, let's
1:46begin.
1:47And I warn you, this is not a short
1:49story. The market never rewarded
1:51impatience. It won't start today. It was
1:541891. I was 14 years old. I had just
1:58arrived in Boston from a small farm in
2:00Shrewsbury, Massachusetts. My father had
2:03pulled me out of school. He thought
2:04farming was the future. I thought
2:06numbers were mine. My mother secretly
2:09gave me $5, all she had, and told me to
2:12go make something of myself. I got a job
2:15as a quotation board boy at Paine
2:17Webber. All I did was take the numbers
2:19that came off the ticker tape and post
2:21them on the big board so the customers
2:23could see the prices. That was it. That
2:26was the job. But here's what happened
2:28while every other boy just wrote the
2:30numbers down and moved on. I started
2:32writing them in a little notebook. Not
2:35because anyone told me to. Not because
2:37there was a system. Just because I
2:39noticed something. The numbers had a
2:41rhythm. They moved in patterns. A stock
2:44that opened strong on Monday had a
2:46certain behavior by Thursday. A stock
2:48that gapped up on news behaved
2:50differently than one that drifted up
2:52quietly over 3 days. I couldn't explain
2:55it scientifically. I just felt it. Like
2:58a musician who can't explain music
3:00theory, but knows when a note is wrong.
3:03Within a year, I was paper trading in my
3:05notebook imaginary trade at as, no real
3:09money, and I was right more than I was
3:11wrong. A lot more. I was 15 when I
3:14placed my first real trade in a bucket
3:16shop. For those of you who don't know
3:18what a bucket shop is, these were small,
3:21unregulated establishments where
3:23ordinary people could bet on stock
3:25prices without actually owning the
3:28stocks. You put up a small margin, you
3:30picked a direction, and if the price
3:33moved your way, you made money. If it
3:35didn't, you were wiped out. The big
3:38brokerage houses hated them. The
3:40newspapers called them dens of thieves.
3:42To me, they were school.
3:44My first trade was in Burlington stock.
3:47I put in a few dollars with a friend of
3:49mine. We split the profit 50/50.
3:52My share came to $3.12.
3:55$3.12.
3:57I will never forget that number for as
3:59long as I live. Because in that moment,
4:02standing outside that bucket shop on a
4:04cold Boston afternoon,
4:06I understood something that would define
4:08the rest of my life. The market was a
4:11machine that could DB read. Not
4:13perfectly, not always, but enough.
4:16Enough to trade. By the time I was 16, I
4:19had made over $1,000 from the bucket
4:22shops. When I was 17, the bucket shops
4:25started banning me. Not because I
4:27cheated, not because I did anything
4:29illegal, but because I won too
4:31consistently, and they were losing money
4:33on my trades. Think about that. I was 17
4:37years old, and professional gambling
4:39establishments were banning me because I
4:41was too good. Now, I'm going to stop
4:43here, right here, and tell you something
4:46important. Because what I just described
4:49sounds like genius, like natural talent,
4:52like I was born with some special gift.
4:54That is completely wrong. What I had was
4:57not genius. What I had was observation
5:00and patience. I had spent hundreds of
5:02hours watching numbers, thousands of
5:04hours thinking about why prices move. I
5:07had a notebook full of patterns before I
5:09ever risked a single real dollar. The
5:12one thing I never had, and this would
5:14destroy me later, was die zipline over
5:17myself. More on that later.
5:20When I came to New York at age 21,
5:22I thought I was ready. I had been the
5:24king of the Boston bucket shops.
5:27I had made and lost several small
5:29fortunes already, always making it back,
5:31always feeling invincible. I walked into
5:34Fullerton's brokerage office on Wall
5:36Street with $2,500 in my pocket and
5:39absolute confidence in my ability. I was
5:42humbled within weeks. Here's what
5:44happened, and here's the first great
5:46lesson.
5:47In the bucket shops, you placed your bet
5:50and within seconds you knew if the price
5:52moved your way. The execution was
5:54instant. There was almost no slippage
5:56between when you decided to act and when
5:59the trade was live. On Wall Street,
6:02there was a delay. By the time my order
6:04went to the floor, by the time the
6:06specialist executed it, by the time the
6:09confirmation came back, the price had
6:11moved. And in those few seconds, the
6:14edge I had from reading the tape was
6:16gone. I was reading the market
6:18correctly. I was calling G the direction
6:22correctly, but I was losing money. This
6:24nearly broke me. Not financially at
6:26first, mentally. I kept asking myself,
6:29"What is different? The numbers are the
6:31same. The patterns are the same. Why am
6:34I losing?" And then one night, sitting
6:37alone in my apartment with my notebook
6:39spread across the table, it hit me. The
6:42bucket shops had been reacting to price
6:44as it was happening. I was making micro
6:47trades short, quick, in and out. The
6:50bucket shop was perfect for that game.
6:52But the real stock market, the New York
6:54Stock Exchange, was a different animal.
6:57It moved in bigger waves. The noise in a
7:00single hour was tremendous. You could
7:02not trade the minute-to-minute
7:03fluctuations and win. The commissions
7:06and the slippage would eat you alive. To
7:08win in this market, I needed to think in
7:10terms of the major moves, the big
7:13swings, the waves that lasted weeks and
7:15months, not minutes. And that is when I
7:18discovered the setup. Not a technical
7:20indicator, not a formula, not a system
7:23someone so lend me. A setup that was
7:26rooted in something much deeper.
7:28Something called the line of least
7:29resistance. Imagine a river, not a small
7:32stream, a great river like the
7:34Mississippi. Now imagine you are in a
7:36small boat on that river. If you paddle
7:39against the current, you will exhaust
7:41yourself and go nowhere.
7:43If you paddle with the current, even a
7:45weak effort moves you forward with
7:47tremendous speed. The stock market is
7:50that river. At any given time, the
7:52market or any individual stock has a
7:54line of least resistance, a direction in
7:57which price is most naturally inclined
8:00to move, not because of manipulation,
8:02not because of news, but because of the
8:05underlying accumulation or distribution
8:07of shares, the balance of supply and
8:10demand, and the prevailing sentiment of
8:12the crowd. My entire trading philosophy,
8:15every great trade I ever made, came down
8:18to one thing, identifying the line of
8:21least resistance, waiting for
8:23confirmation that it had been
8:24established, and then moving with it.
8:27That sounds simple, and it is simple,
8:29but simple is not the same as easy,
8:32because between identifying the probable
8:34direction and waiting for confirmation,
8:36there is a gap, a painful, agonizing
8:39tempting
8:40gap called time. And in that gap, the
8:43market will do everything in its power,
8:45not intentionally, but by its nature, to
8:48shake you out of your conviction. Let me
8:50give you a real example. In 1906, I was
8:53watching Union Pacific. I had been
8:55studying this stock for weeks. The tape
8:58told me something was wrong. The stock
9:00was strong on the surface, the news was
9:02good, the market was bullish, but there
9:04was something in the behavior of the
9:06price that bothered me. When good news
9:08came out and a stock doesn't go up the
9:10way it should, that is a warning. That
9:13is the market talking. And if you know
9:16how to listen, it will tell you the
9:18truth before the newspapers ever do.
9:21I had a feeling, not just a feeling, a
9:23reading of the tape that Union Pacific
9:26was going to break badly. I went short.
9:28I sold shares I didn't own, WN, betting
9:32they would fall. Two days later, on
9:35April 18th, 1906,
9:37the San Francisco earthquake struck.
9:40Union Pacific and every railroad tied to
9:42the West Coast collapsed. My short
9:45position made me a quarter of a million
9:47dollars in a matter of days. Now, I want
9:49you to understand something. I did not
9:52predict the earthquake. No one can
9:54predict a natural disaster. What I
9:56predicted was the vulnerability. The
9:58setup was already there.
10:00The stock was telling me it was weak,
10:02that the forces of distribution were
10:04overcoming the forces of accumulation.
10:07The earthquake was merely the trigger
10:08that exposed what the tape had already
10:10been telling me. And this is the most
10:13important thing I can say to you about
10:15the setup. The setup is never about
10:17knowing what will happen. The setup is
10:19about identifying where the market is
10:21most vulnerable either to go up or to go
10:24down and waiting for the market itself
10:27to confirm your reading before you
10:29commit. Now, I need to talk to you about
10:32what I call the pivotal point. That
10:34because this is the engine of the setup.
10:36Every great move in any stock before it
10:39makes its major advance or its major
10:41decline goes through a period of
10:43consolidation. A period where the price
10:45moves in a narrow range, building
10:48energy, building pressure, like water
10:50behind a dam. During this time, weak
10:53holders are shaken out. The impatient
10:55speculators who bought on rumor sell in
10:58disgust because nothing is happening.
11:00The short sellers who were expecting a
11:02crash cover their positions and walk
11:05away because the stock isn't falling.
11:07And slowly, quietly, the stock is being
11:10accumulated or distributed by hands that
11:13are smarter, richer, and more patient
11:15than the crowd. Then something happens.
11:18The dam breaks. The stock breaks out of
11:20its range either to the upside or the
11:22downside with conviction and volume. And
11:25that break, that first decisive move
11:27through a level that had previously held
11:29as resistance or support, that is the
11:32pivotal point. That is when you act, not
11:35before. After this is where most
11:38speculators get it backwards. They buy
11:41at the bottom of the range thinking
11:43they're being smart by getting in cheap.
11:46They sell at the top of the range
11:48thinking they're locking in a small
11:50profit. They are playing small sideways
11:53games while the big money is waiting for
11:55the directional move. I had a rule and I
11:58followed it when I was at my best and I
12:00abandoned it when I was at my worst. The
12:03rule was this, never act on a stock
12:06until the stock itself tells you the
12:07time has come and it tells you through
12:10the pivotal point. Let me explain this
12:12with another real example.
12:14In 1907, I had been watching the entire
12:17market for months. Something was wrong.
12:20Not with any single stock, with
12:22everything. The credit was contracting.
12:24The banks were tight. The railroads were
12:27overextended and the market, despite a
12:29few rallies, kept coming back and
12:31testing the lows. Every time the market
12:34tried to rally in 1907, it got a little
12:37weaker. The rallies were shorter, the
12:40reactions were deeper and D, the volume,
12:43the volume was telling a story of
12:45distribution. Smart money was selling
12:47into every rally while the public was
12:49buying. I went short the entire market,
12:52not one stock, the whole market and I
12:55made over $3 million in the panic of
12:571907.
12:59J.P. Morgan himself sent an emissary to
13:02ask me to stop my short selling because
13:05it was accelerating the panic. I agreed
13:07to cover my positions and help support
13:10the market, not because I was told to,
13:12but because the move was over. The line
13:15of least resistance had changed. $3
13:18million
13:18in 1907.
13:20Do you understand what that is worth
13:22today? But here's the part of the story
13:24they always leave out. Within 2 years, I
13:27had lost most of it, not because the
13:29market beat me, because I beat myself.
13:32This is the part of the video that no
13:34one wants to hear.
13:35But, it is the most important part,
13:37because I can teach you the setup in 30
13:39minutes, the pivotal point, the line of
13:42least resistance, waiting for
13:44confirmation. These are concepts why or
13:47can understand intellectually right now.
13:50But, the enemy is not the market. The
13:52enemy has never been the market. The
13:54enemy is the man in the mirror. The
13:56enemy is the 13 specific human emotions
13:59that will try to destroy you every
14:01single time you sit down to trade. Hope,
14:04fear, greed, impatience, ego, boredom,
14:07excitement, desperation, overconfidence,
14:10underconfidence, stubbornness, regret.
14:13And the deadliest of all, the need to be
14:15right. Let me tell you about my greatest
14:17enemy. His name was not a man, it was a
14:20habit. And the habit was called taking a
14:22tip. In 1915, I had come back from my
14:26second bankruptcy. I had rebuilt my
14:28account. I was disciplined. I was
14:31following the tape. I was reading the
14:33pivotal points correctly. I was on my
14:35way back. And then, a man I respected, a
14:38man who had made real money in cotton,
14:40gave me a tip. He told me to buy a
14:43certain cotton position. He was
14:45confident. He had inside knowledge, he
14:47implied. He was not a fool, and I, Jesse
14:50Livermore, the boy plunger, the man who
14:53had made millions reading the tape with
14:55no outside advice, I listened.
14:58I abandoned my own reading of the market
15:00and followed someone else's opinion. I
15:02lost a fortune, and I sat in my office
15:05afterward and asked myself why. Why
15:08would a man who had proven over 20 years
15:11that he could read the market himself
15:13abandon his own judgment for someone
15:15else's tip? The answer was vanity and
15:18something worse, the desire for for easy
15:20shortcut. Because reading the tape is
15:22hard work.
15:23Watching and waiting for the pivotal
15:25point is exhausting and boring. The tip
15:28promised a shortcut. It promised
15:30certainty.
15:31And certainty, the illusion of
15:33certainty, is the most expensive thing a
15:35speculator can buy. Every time I
15:37deviated from my method, every time I
15:40listened to tips, every time I traded on
15:42emotion rather than the tape, I lost
15:45money.
15:46Every single time. And every time I
15:48followed the method patiently,
15:50ruthlessly, without emotion, I made
15:52money. Now, let me break down the setup
15:55for you in the e-clearest terms I can.
15:58There are three things that must align
16:00before I place a major trade. The first
16:02is time. The market must be telling me
16:05that the time is approaching, not here
16:07yet, but approaching.
16:09How do you know this? By watching how
16:12the stock behaves relative to the
16:13general market. Is it strong when the
16:16market is weak? That is a sign. Is it
16:19weak when the market is strong? That is
16:21a warning sign. The second is price.
16:23Price must reach the pivotal point. Not
16:26close to the pivotal point. Not
16:29approaching the pivotal point. The
16:31pivotal point. If the stock needs to
16:33break above $100 to confirm an advance,
16:36and it trades at 98, that is not a buy.
16:39That is a wait. The moment it trades at
16:41101 with conviction, with volume, that
16:44is the buy. I know that sounds obvious,
16:47but you have no idea how many men I have
16:49watched buy at 98, get shaken out at 95,
16:53and then watch in agony as the stock
16:56goes to 150. They were r i g h t about
17:00the direction. They were early on the
17:02timing, and being early in speculation
17:05is exactly the same as being wrong. The
17:07third is the behavior of the general
17:09market. Even the strongest stock in the
17:12world can be dragged down by a crumbling
17:14general market. I always wanted the
17:16general market on my side. If I was
17:19going to be long buying stocks, I wanted
17:21the market in an uptrend. If I was going
17:24to be short selling stocks, I wanted the
17:26market in a downtrend, swimming with the
17:29tide, always. When all three align, when
17:32time is right, when the pivotal point is
17:34confirmed, and when the general market
17:37supports the move, that is when I act.
17:39And I act decisively, not a small test
17:42position, not a cautious toe in the
17:44water, a real position. Because here is
17:46the truth about trading that no one
17:49wants to admit. If you are not wrong
17:51very often, you need to make very sure
17:54that when you are right, you make enough
17:56to compensate for all the times you
17:58waited, and all the times you made a
18:00small loss. The small loss, by the way,
18:03is sacred. Let me talk about the small
18:06loss. When I was wrong, when a trade
18:08went against me from the beginning, I
18:10had one rule that I violated more than
18:12any other in the bad years, and followed
18:15faithfully in the great years. Cut the
18:18loss immediately, not when it becomes a
18:20big loss, not when you have a chance to
18:23get back to break even, not when the
18:25stock looks like it might be turning
18:27around, immediately, at the first sign
18:29that the trade is wrong.
18:31How do you know the trade is wrong?
18:33Simple. If you bought a stock because
18:35you expected it to advance from the
18:37moment of your purchase, and instead it
18:40goes against you, the market is telling
18:42you that you were wrong. Get out. The
18:44greatest disaster in speculation is the
18:46small loss that becomes a big loss
18:49because the trader would not accept he
18:51was wrong. I have watched men hold
18:54losing positions for months, years in
18:56some cases, feeding money into a losing
18:59trade because they could not emotionally
19:01accept the pain of taking a loss. And
19:04every day they held that loser, their
19:06capital was trapped, their mind was
19:09occupied, and they were missing the real
19:11opportunities that the market was
19:12presenting. There's a phrase I used for
19:15years, cut your losses and let your
19:17profits run. You have heard this phrase.
19:20Everyone has heard this phrase and
19:22almost no one actually does it because
19:25cutting a loss requires admitting you
19:27are wrong and the human ego, especially
19:29the ego of a man who believes himself to
19:31be a skilled speculator, will do almost
19:34anything to avoid admitting it is wrong.
19:37The market does not care about your ego.
19:39In 1929,
19:41I made my greatest trade. By that time,
19:44I was watching the market with the same
19:46feeling I had felt in 1906 and 1907.
19:50Something was deeply, fundamentally
19:52wrong. The market had been advancing for
19:55years on credit. People were buying
19:57stocks on 10% margin, meaning they put
20:00up $10 and borrowed 90 to buy $100 of
20:05stock. One small decline and they went
20:08would be wiped out. The banking system
20:10was fragile. The economic fundamentals
20:13beneath the euphoria were crumbling. I
20:16began building my short positions in
20:181928. Not all at once, slowly,
20:21carefully, testing the waters and the
20:24market kept going up. My positions were
20:27wrong for months. Most men would have
20:29abandoned the short side and joined the
20:31bulls, but the tape kept telling me the
20:34truth. The leadership stocks, the stocks
20:37that had been leading the market higher
20:38for years, were beginning to show
20:40weakness. They were making new highs on
20:43lower volume. The rallies were becoming
20:45more frenzied but shorter lived. When a
20:48market becomes manic, when everyone is a
20:50genius, when taxi drivers give you stock
20:53tips, when the newspapers write of
20:55unlimited prosperity, that is not a sign
20:57of strength.
20:58That is the final gasp. On October 24th,
21:011929,
21:03Black Thursday, the market collapsed. By
21:06the time it was over, I had made over
21:08$100 million. I had made over $100
21:09million. $100 million in 1929.
21:13I was perhaps as the only man in America
21:17who made money as the country fell into
21:19the Great Depression. And within 4
21:21years, it was gone. Gone through poor
21:23speculative decisions, through personal
21:25chaos, through trading when I should not
21:28have been trading, through breaking
21:30every rule I had ever set for myself.
21:32So, why am I telling you all of this?
21:35Because I need you to understand
21:36something that took me 50 years to fully
21:38accept. The setup, the pivotal point,
21:41the line of least resistance, the
21:43confirmation, the aligned conditions,
21:45that is not the hard part. The hard part
21:48is the man. The market is the same for
21:51everyone who looks at it. The ticker
21:53tape tells the same story to everyone
21:55who reads it. The patterns repeat decade
21:58after decade because human nature does
22:00not change.
22:02Fear and greed looked exactly the same
22:04in 1891 as they did in 1929.
22:07And I assure you they look exactly the
22:09same today. The man who sits down to
22:12trade brings with him all his hopes and
22:14fears, all his ego and insecurity, all
22:18his need to be right and his terror of
22:21being wrong. And the market, ruthless,
22:24impersonal, without mercy, will find
22:26every weakness in that man and exploit
22:29it until he is broke. The only defense
22:31is rules. Rigid, written, inviolable
22:35rules, not guideline A, rules. Mine were
22:38simple.
22:39Never buy a stock because it is cheap.
22:41Buy it because it is ready to advance
22:43and the tape confirms it. Never add to a
22:46losing position.
22:47If the market says you are wrong,
22:49believe it. Never fight the general
22:51market trend. If the market is going
22:53down, do not be long in stocks, period.
22:57Take losses quickly. Take profits
22:59slowly. Never act on a tip. Trust only
23:01the tape and your own analysis. And the
23:04most important rule of all, one I wrote
23:06for myself and could never consistently
23:09follow, and it cost me everything. Know
23:12when not to trade. There are times when
23:14the market gives clear signals, times
23:16when the pivotal points are obvious,
23:18when the general trend is unambiguous,
23:21when the tape is speaking loudly and
23:23clearly. And there are times when
23:25nothing is clear.
23:27When the market is in a trading range,
23:29moving sideways, making false starts in
23:32both directions, punishing anyone who
23:34commits strongly to either side. In
23:37those times, the correct action is to do
23:39nothing, not to trade, not to speculate,
23:42to sit on your hands with your capital
23:44safe and your patience intact, waiting
23:47for the next great opportunity. This
23:49sounds easy. It is the hardest thing in
23:52the world because the speculator who is
23:54not in the market feels like he is
23:56missing something. His competitive
23:58instincts demand action. His boredom
24:01seeks stimulation. His ego tells him he
24:04should be able to find a trade even in a
24:06directionless market. The market will
24:09accommodate that demand. It will give
24:11him a trade. It will take his money. And
24:14then, while he is nursing his losses and
24:16his wounded pride, the great move will
24:19begin and he will be too damaged
24:21financially and psychologically to take
24:23full advantage of it. Let me tell you
24:25about the one quality that separate ease
24:28the great speculators from all the
24:30others. It is not intelligence. I have
24:32met brilliant men who were destroyed by
24:34the market. It is not courage. I have
24:37met fearless men who traded themselves
24:39to ruin. It is not even discipline,
24:42though discipline is essential. The one
24:44quality that makes the difference, the
24:46thing that every great trader I ever
24:48observed or competed against possessed,
24:51is patience. The patience to watch and
24:53wait while lesser men act and lose. The
24:57patience to sit through the normal
24:58reaction against your position without
25:00panicking, the patience to hold a
25:02winning trade through the small
25:04reversals, knowing the major move is
25:06still intact, the patience to do nothing
25:09for weeks or months when the market
25:11offers nothing worth doing.
25:13And the patience, perhaps the rarest
25:15patience of all, to rebuild after a
25:17catastrophic loss without rushing,
25:20without desperation, without abandoning
25:22the method that works in favor of
25:24something reckless that promises quick
25:26recovery. I was patient with the market.
25:29I was never patient with myself.
25:31And that distinction cost me everything
25:33I ever earned. There is something I want
25:36to say to the younger men and women
25:38watching this. You are trading in a
25:40world of infinite information, screens
25:42full of data, television commentators
25:45telling you what to buy every hour,
25:47social media filled with people showing
25:49you their winning trades and hiding
25:51their losses,
25:53a thousand newsletters, a thousand
25:55systems, [snorts]
25:56a thousand self-proclaimed gurus, all
25:59claiming to have the secret. None of
26:01them have the secret. The secret is what
26:03I have told you, the pivotal point, the
26:06line of least resistance, the general
26:08trend, the small loss, the patience to
26:11wait. That is everything. There is
26:13nothing more. But here is what those
26:15thousand gurus will never tell you. The
26:17method means nothing without the
26:19discipline to follow it under pressure.
26:22And you will only discover the depth of
26:24your discipline when you are wrong, when
26:26a trade has gone badly against you, when
26:28you are down, wanting, when the voices
26:31in your head are screaming at you to
26:33hold on just a little longer. That is
26:35the moment that defines a trader, not
26:38the winning trades, not the big calls
26:40that pay off spectacularly. Those are
26:42easy. Anyone can hold a winner when it's
26:45going up. The moment of definition is
26:47the losing trade, the trade that didn't
26:49work. What do you do in that moment? If
26:52you cut it quickly, accept the loss,
26:55reset your mind, and return to your
26:57analysis, you have the character of a
26:59trader. If you hold it, hoping and
27:01praying and averaging down, and telling
27:04yourself that the market will come back
27:06to you, you do not yet have that
27:08character, but you can build it. Every
27:10trader I ever respected built it the
27:12hard way by learning from losses. The
27:15market is the greatest teacher in the
27:17world, but it charges very high tuition.
27:20I want to close with something personal.
27:22I have been asked many times, knowing
27:24what I know, after all the triumphs and
27:27all the losses, would I do it again?
27:30Yes, without hesitation. Yes, because
27:33there is nothing in this world, nothing
27:35quite like the feeling of reading the
27:37market correctly, of watching a stock
27:39for weeks, seeing the pattern develop,
27:42waiting for the pivotal point, and then
27:45placing your position and being right.
27:47Not because you were lucky, because you
27:49were paying attention when everyone else
27:51was distracted, because you were patient
27:54when everyone else was impulsive,
27:56because you trusted your analysis when
27:58everyone else was listening to rumors.
28:00That feeling is not about money. The
28:02money is simply the way the market keeps
28:04score.
28:06The feeling is about clarity, about the
28:08rare, precious clarity of seeing
28:10something truly as it is, not as you
28:12wish it to be, not as others say it is,
28:15but as it actually is. Trading, at its
28:18highest level, is an exercise in seeing
28:20reality clearly. And most people in
28:23trading and in life are so consumed by
28:25what they want to be true that they
28:27cannot see what is actually true.
28:30The market will not allow that delusion
28:32for air long. Here is your homework. Not
28:35an assignment to practice.
28:37For the next 30 days, find one stock
28:40that you believe is approaching a
28:41pivotal point. Write down your analysis.
28:44Write down the specific price level that
28:46would confirm the move. Write down the
28:48condition of the general market and
28:50whether it supports your thesis. Then
28:53wait. Do not act until the pivotal point
28:55is confirmed, not almost confirmed,
28:58confirmed. If it is confirmed and you
29:00are right, hold the position until the
29:03tape tells you the move is over, not
29:05when your emotions tell you. If it is
29:07not confirmed, if the stock goes the
29:09other direction, do nothing.
29:11You made no trade, you lost no money,
29:14and you learned something valuable about
29:16reading the pivotal point. Do this for
29:1830 days. Don't trade. Just observe and
29:21record. I promise you that at the end of
29:2430 days, you will understand the market
29:26better than most men who have been
29:28trading for 30 years. Because most men
29:31spend 30 years acting. They never spend
29:34time, 30 days, watching. The market
29:36rewards those who watch, who wait, who
29:39act with precision, and who accept the
29:41verdict of the tape without argument or
29:44ego. Everything else, every other
29:46strategy, every indicator, every tip,
29:49every shortcut will eventually cost you
29:52more than you made. I know. I paid for
29:54that knowledge with everything I had. Do
29:57not make me pay for your education, too.
29:59The ticker tape tells the truth. Learn
30:02to listen to it. Have the patience to
30:04wait for it to speak clearly. Have the
30:06courage to act when it does. And have
30:09the discipline, please, the discipline
30:11to protect what you have built. Because
30:13in this game, it is not the biggest
30:15winner who succeeds. It is the man who
30:18is still standing when the big move
30:20finally comes. Be that man. Be that
30:22woman who waited. The market will reward
30:24you.

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