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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Livermore believed that one of the most important qualifications for a successful trader was poise which, to him, was defined as stability, balance, and dignity of mannerHow Livermore Prepared for His Day Poise, Patience, and Silence are essential to achieve psychological balance. Livermore believed that one of the most important qualifications for a successful trader was poise which, to him, was defined as stability, balance, and dignity of manner. A poised person is a person who can handle his hopes and fears in a calm way. The other qualification is patience, to wait for the opportune time, when as many factors as possible are positioned in the traders favor. Poise and patience are the close friends of successful traders. The final qualification is silence. Keep your own silent counselkeep your victories and your failures to yourselflearn from them both. Poise, patience, and silence are attributes that must be cultivatedthese virtues do not come automatically to the stock market trader. Livermores early experiences working at 15 as a board boy in the Paine Webber office in Boston had a profound impression on him. He had no time for group behavior when trading stocks for his own account. His early observations had convinced him of the pitfalls of listening to other people. Even if you knew the rules, sometimes other peoples opinions would sink subconsciously into your mind and influence your trading. It was Livermores opinion that a persons work space when trading the market was very important psychologically and could play a major role in the ability to trade. He also felt that the serious traders trading space provided the largest part of their income, so he did not hesitate to spend money on his work space. He was quite aware that setting up a proper working environment could mean a great deal in profits on the trades he made. Livermores office was his sacrosanct Trading Room. His main objective was to protect himself from all unwelcome bad influencesin particular he was trying to avoid anyone who might be inclined to offer assistance by giving him some information in the form of a tip. Tips were the one thing that had done him the most harm in trading. He never wanted to be part of a group of stock market traders, especially those who gathered in the brokerage offices. His main reason was that he needed focused continuity of thought for more than 15 minutes at a time. He had no interest in tips, gossip, and the interpretation of the daily news events concerning the stock market by the people gathered in an office. The larger brokerage offices where great numbers of people gathered was chaos to his brain. As far as he was concerned, it was hurtful to his trading to be with these people, with their own individual biases and their own hidden agendas, which did not necessarily match up with his own. He believed in working in silence and keeping his own counsel. As a friend of his once told him, I do not take tips. I prefer to make my own mistakesnot the mistakes of other people! As far as Livermore was concerned, his friend was right. He always traveled from his home to his offices undisturbed, either by car or on his yacht in the better weather. He did this in silence, carrying no other passengers; this gave him a chance to read the newspaper and plan his day. He did this to avoid meeting people who would inevitably inquire about the stock market; the subject came up almost automatically because Livermore was so famous. He would then be forced to listen to tips, gossip, and prognostications that would inevitably creep into his conscious and subconscious mind and therefore affecting his judgment. If he traveled by himself, he could continue his thoughts without any interference in implementing his plan for the day. He used to borrow his friend Bernard Baruchs method, who told his brokers: If you know anything about the stock I am trading . . . please do not tell me. Livermore was often the first one to the office, followed by Harry Dache, his office and security manager. The board men, usually six in total, arrived at the office by nine oclock to take their positions on the chalkboard to file the trades as they occurred. For volume numbers, Livermore consulted the actual ticker tape. He positioned the main ticker in the center of the room on a tall podium so all he had to do was raise or lower his eyes from the tape to the chalkboard to see the action of stocks he owned or was interested in. He also employed telephone lines that went directly to the hot posts he was trading at the time, say, steel, motors, mail order, or radio. He used the largest and fastest ticker tape and positioned it at near eye level, so it was easily accessible. In fact, he generally used tall ticker tapes so that he was forced to stand while reading the tape. Standing in an erect position ensured proper blood circulation and better breathing. He found this helped to keep him calm during stressful trading periods. He made it his policy to be on his feet nearly all the time that the market was open. This gave him a little exercise and kept his senses at a higher pitch. He was never bent over or lounging. He considered the market a great challenge that demanded total concentrationit was not for the lazy. He even stood while telephoning. He allowed no talking once the bell rang; he demanded silence in the office while the market was open. His phone number was known to very few people, and he would often change it to keep people from reaching him. He received and answered as little mail as possible during the work day. He was only interested in the stock market; it was his sole job, and he considered everything else an unwelcome distraction. One of the things he liked best about his job, after he had fallen into many pitfalls and managed to climb out, was the solitudehe loved the individuality, being the lone wolfeverything that happened occurred as a result of his judgment. He structured his office so there were as few outside influences as possible. He had no interest in sharing his market experiences with anyone the good or the bad. His attitude was how could they care, or help me, my trading had nothing to do with their lives, and they certainly couldnt help me. Further, he wanted no help. He was also conscious of the fact by then that if you do well, if you are successful, most people become envious, and they covet your success; if you do poorly they revel in your misfortune and tell their friends that you have finally been humbled by the stock marketand that You had it coming for your reckless behavior. So silence is best, since there is nothing to gain through informing people of your activities. The satisfaction of being correct, understanding and beating the tape . . . it was enough for him to know. He did not have to tell other people of his successes or failures. By then, it was usually too late anyway, the trade was over. On October 5, 1923, in order to fully practice his new techniques and theories, he moved his offices from 111 Broadway uptown to 780 Fifth Avenue, the Heckscher Building. He designed the offices very carefully. He wanted to be away from the Wall Street atmosphere, out of earshot of any tips. He also wanted to have more secrecy and security in his operations, so that no one could know his trades. Sometimes, he used over fifty brokers to downsize and spread out the orders in order to keep his trades secret. Inside the building, there was a private express elevator that traveled only to Livermores penthouse floor. The offices occupied the entire floor. He purposely had no sign on the office door where the elevator stopped. Once inside this door, there was a small anteroom, a kind of waiting room where Harry Edgar Dache had one of his desks. Harry was described by the New York Press as pug ugly with a personality to match. He stood a solid six feet six inches and weighed close to 300 pounds with the battle-scarred face of a pugilist. Harrys looks belied his high intelligence. Livermore had interviewed him for only half an hour and hired him on the spot. Harry had been in the Merchant Marine and traveled the globe many times. He spoke six languages, including Latin. He was a voracious reader, knowledgable in many areas, and a terrific administrator. He ran the office with secrecy and perfection. He was completely loyal to Livermore and very protective of him and his family. The boys loved Harry. Jesse Jr. and Paul were enthralled with his magical stories of traveling the seven seas. He was their unofficial tutor, chauffeur, companion, and bodyguard, especially when they went to Palm Beach. There were no windows in the anteroom, only a few chairs and Harrys desk. Behind Harry was the solid floor-to-ceiling door to the offices. There were no signs or identification on any doors. To let someone in to see Livermore, Harry would always confirm the appointment first by intercom, when the guest arrived, no matter who it was. He would then rise from his desk and use his key to open the door to the offices for the visitor. It was a theatrical ritual that Harry liked to perform, to show the visitor the difficulty in gaining entrance into the Trading Room. And it worked. Behind the door was a massive open room with a green chalkboard that ran the entire length of the room. There was a catwalk in front of the chalkboard where four to six men would work in silence. They each would have a section of the board. They were responsible for active stocks or commodities being traded or stocks on the watch list that were being closely observed. These men were paid very well and sworn to secrecy; Harry Dache assured they remained loyal. Each man wore head phones that connected to the floor of the exchange. Men on the floor would often call up the instant quotes to Livermores board men, who would immediately write down the individual stock transactionthe bid, asked, and sold price. So, on many occasions, they did not work off the ticker tape. It was too slow. This gave Livermore an edge on the ticker tape, which was usually delayed at least fifteen minutes and up to hours in a fast market. He wanted the most current information he could gethe had learned the hard way as a young man how important fresh quotes were. If Livermore was active in several stocks or commodities, he would often increase the staff from four to six men on the chalkboard. These men would work all day on the catwalk, in silence, only taking a short break for lunch, when they would usually be replaced by Harry, so no quotes were lost. These board men would always track two or more stocks in the same group. If Livermore was trading General Motors, he would track Chrysler as well, to observe the Industry Group action. In the middle of the office was a massive conference table of shiny mahogany with eight comfortable leather armchairs. On the rare occasions when guests were invited to the office, he would always sit facing the chalkboard so he could watch the quotes as he listened to the guests. Livermore would, on occasion, interrupt the meeting to enter his office and place his trades in private. His personal, private office was very large, with heavy oak and mahogany paneling. He had seen the paneling in a library in an old English manor and had purchased it. The library was disassembled and shipped to New York where it was reassembled. His desk was large, made out of highly polished mahogany. On the desk were an In basket and an Out basket, and a pad and pencil. The wall adjacent to the mahogany desk that faced the chalkboard was a solid sheet of clear plate-glass, so he could see the market action as it happened from his desk. The glass was cleaned personally by Harry at least once a week. There were three black telephones on his desk. One was a direct wire to London, the second went to Paris, and the third went directly to the floor of the Chicago grain pits. He wanted first-hand, fresh information, and he was willing to pay for it. He knew that wars were won on information and intelligence, and the general with the best information, the best intelligence, was the one most likely to win. And he wanted no rumors of war, he wanted only specific, accurate information. His son Paul often came to this office as he grew up, especially on his summer breaks. Livermore sometimes allowed him to work the chalkboard. The board men were trained to work with a code that they explained to Paul. If a stock suddenly had a deep price fluctuation, they would use a secret code to note this on the board. These codes were known only to the board men and Livermore. It was what he later called his Livermore Secret Market Key. On occasion, there would be guests in the office who would ask him: J.L. what the hell are those weird columns on the chalkboard, some kind of hieroglyphics? They make perfect sense to me, he would respond. You wanna explain them to me? No, he would smile. If I did, then you would be as smart as I am. Just tell me what to buy and selland whenthats allkeep it sim ple for me. You know I never recommend a stock, but I would be glad to tell you whether I believe the market is going up or down. It always goes up or down, J.L. Youre right of course, but the trick is when is it going to go up or down. And what stocks are going to go up or down, J.L.? Dont forget its what particular stocks are going to go up or down; thats what we all want to knowwhat stock will rise and when. If a man knows the general trend of the market he should be able to do well. Whatever you say, J.L., whatever you say. One day he was sitting in his office talking to his son Paul, when he said, Turn around Paul, and look at the chalkboard. Paul turned and studied the men as they moved on the catwalk like well choreographed dancers. Livermore continued: You see, son, those markings on that board are as clear to me as a musical score is to a great conductor. I see these symbols as alive, a rhythm, a heartbeat, a pulse, that makes beautiful music it all makes perfect sense to me. For me the board is alive, like music; we are able to communicate. Its something that has come to me only after years of hard work and practice, not unlike a great conductor of a great orchestra. What I feel when I look at that board cant be shared, anymore than a conductor could articulate what he feels when he plays Mozart just the way it should be played. The board and those men are a playing a symphony for me, a symphony of moneythat sings to methat makes love to methat envelops me in its song. Paul studied his father carefully that afternoon. He believed every word. It was a rare moment for Paul, to get so intimate with his father, who was a private man, stingy with his emotions, frugal with his love. |
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