Con ten ts .

CHAPTER I .

IntroductoryCHAPTER II .

Preliminary S ugg estionsCHAPTER I I I .

The S tock List AnalyzedCHAPTER IV .

S top Orders, Trading Rules, E tc .

CHAPTER V.

Volumes and Their S ig nificance

CHAPTER V I .

Market TechniqueCHAPTER V II .

Dull Markets and Their OpportunitiesCHAPTER V I I I .

The Use o f Charts as Gu ides and Ind icators

CHAPTER IX.

Da ily Trades vs . Long Pul l OperationsCHAPTER X.

Various E xamples and Sug gestionsCHAPTER XI .

Ob stacles to be Overcome—Possible Profits 166

CHAPTER XII.C losmg the Trades—S ug gestions for S tu

dents

Stu dies in Tape Readin g

I . Intr odu cto ry

HERE i s a w idespread demandfor more l ight on the subj ect o fTape Reading. Thou sand s o f

traders enterta in the idea that insome way the market momentar i ly indicates its own immediate fu ture ; thatthese indicat ions are accurate ly recordedon the tape ; there fore he who can interpret what i s imprinted on the narrowpaper ribbon has w ith in his reach uh

l imited wealth .

It seems to me that such an Opinion is Success o f

fully warranted for it is well known that Tape Readersmany of the most successfu l traders and

operators of the present day beg an operations by successfu l Tapefi eading ,

trad

ing in fractiona l lots of stock w ith a capital of only a few hundred dol lars .

Speak ing o f Joe Manning, one o f theshrewdest and most success ful o f al l thetraders on the floor o f the New

’

YorkStock Exchange

,a fr iend o f mine once

sa id :

Joe Mann ing

Menta lQua lifications

0

Tape Read ing

Joe and It

used to trade in ten sharelots together . He was an ordinarytrader

,ju st as I am . We u sed to hang

over the same t ickerThe speaker was

,at the time he made

the remark,st i l l trading in ten-share lots ,

whi le I happened to know that Joe ’s bankbalance—his active work ing capitalamounted to and that th is represents but a part o f the fortune bu i lt onhi s abi l ity to in terpret the language o f

the tape .Why was one o f these men able toamass a fortune , whi le the other neveracqu ired more than a few thousand do llars at the same pursu i t ? Their chanceswere equal at the start so far as capitaland opportun ity go . The mi ll ions werethere wa it ing to be won by either orboth .

The answer seems to be in the pecul iarmental qual ifications

,high ly po tent in

the success ful trader, but unpossessedby the other . There is

,o f course

,a small

e lement o f luck in every case, but pure

luck cou ld not be so su sta ined in Mann ing

’

s case as to carry him through operations covering a term o f years .By proper mental equ ipment we do notmean the mere ab i l i ty to take a loss

,de

fine the trend,or to execu te some other

move characteristic o f the pro fess ionaltrader . We re fer to the active or dormant qual ities in hi s make-up . Thepower to dri l l himse l f into the rightmental att itude ; to stifle his emotion ,

0

Introducto ry

fear,anxiety

,elat ion, recklessness , to

tra in h is mind into obedience so that itrecognizes but one master— the tapethese

,if possessed , would be as valuable

in shaping the result as natural ab i l i ty,

or What i s called the s ixth sense in trading.

Some people are born mus icians,others

seemingly vo id o f mus ical taste, developthemselves into v irtuosos . It i s theamount o f I W ILL in a man whichmakes him mediocre or pre-eminent—inWal l Street parlance, a dub or a b igtrader .Jacob F ield is another exponent o fTape Reading. Those who knew“Jakey when he began his Wal l Streetcareer, were impressed by his abi l ity toread the tape

,and fo llow the trend . H is

talent for this work was doubtless b0rnin him ; t ime and exper ience have intensified it unti l now he is considered by themaj ority o f his fel lows, the Prince o f

Floor Traders .Whatever laurels Mr . Keene has wonas an operator or syndicate manager , donot detract from his reputat ion as a TapeReader . H i s scrut iny of the tape is sointense that he appears to be in a trancewhi le his mental processes are beingworked out . He seems to analyze prices ,volumes and fluctuations down to thefinest imaginab le point

,then telephones

to the floor to ascerta in the character o fthe buying or sel l ing in certa in activestocks . With this aux i l iary in formation

Jacob F ield

Jim Keene

Tape Read ing

he comp letes h is judgment and makes h iscomm itments .Mr . Keene stand s to-day on the pinnacle o f fame as a Tape Reader, and hisda i ly presence at the ticker i s suffi cientevidence that the work pays and payswel l .One might say : These are rare examp les . The average man never makesa success o f Tape Reading .

”

Right you are" The averag e manseldom makes a success o f anything.

Success in this field usual ly resultsfrom years o f pa instak ing effort and ab

so lute concentrat ion upon the subj ect .It requ ires that one devote h is wholetime and attent ion to the tape . Heshou ld have no other bus iness or profession .

“A man cannot serve two masters,

and the tape is a tyrant .One cannot become a Tape Reader by

giving the t icker absent treatment ; norby running into his broker ’s office a fterlunch , or seeing

“how the market c losed”from his evening newspaper. He cannotstudy this art from the far end o f atelegraph or telephone w i re . He shou ldspend twenty-seven hours a week at thet icker

,and many more hours away from

it studying his mistakes and finding the“why” o f his losses .I f Tape Reading were an exact scr

ence, one wou ld simply have to assemblethe factors

,carry out the operat ions in

d icated,and trade accordingly . But the

—8

Introducto ry

factors influencing the market are in

finite in their number and character, aswe l l as in their effect upon the market

,

and to attempt the construction o f aTape Reading formu la wou ldPSEem to befu ti le . However , something o f the k ind( in the rough ) may develop as we progress in this investigat ion

,so let u s pre

serve open minds .What i s Tape Reading?This quest ion may be best answered by

first deciding what it i s not .Tape Reading is not merely look ing atthe tape to ascerta in how prices arerunning.

It i s not reading the news and thenbuying or se l l ing “

if the stock actsright .It i s not trading on tips

,opin ions

,or

in formation .

It i s not buying because they are g oing up,

” or sell ing “because they lookweak .

It i s not trading on chart indicat ionsor by other mechanical methods .It i s not “buying on dips -and se l l ing on

bulges .

”

Nor i s it any of the hundred otherfoo l i sh things practised by the m il l ionso f people w ithout method

,forethought or

calculat ion .

Tape Reading seems to u s : Thescience of determining from the tape theimmediate trend o f pr ices .It i s j udging from what appears on

Tape Read ingD efined

Supply and

Demand

Tape Read ing

the tape now,what i s l ikely to be shown

in five minu tes or more .

It bears no re lation to cla irvoyancyand we do not bel ieve that spirits o f departed friends could be o f ass istance tostudents .Tape Reading i s rapid-fi re horse sense .

Its obj ect is to determine whether UnionPacific

,which is now 1 59 ,

wi l l sel l at 160be fore 1 58 , or v ice versa ; to make deductions from each succeeding transac

t ion— every shi ft o f the market kaleidoscope ; to grasp a new situat ion , force itl ightning-l ike through the weighing machine o f the bra in, and to reach a decis ion which can be acted upon w ith coolness and preci sion—al l within the spaceo f a few seconds .It i s gauging the momentary supply

and demand in particu lar stocks and inthe whole market

,comparing the forces

behind each and the ir r elat ionship,each

to the other and to all .A Tape Reader is l ike the manager o fa department store ; into his office arepoured hundreds o f reports o f salesmad e by the various departments . Henotes the general trend o f businesswhether demand is heavy or l ightthroughou t the store— but lends specialattention to the l ines in which demand isabnormally strong or weak . When hefinds difficu lty in keeping his she lves fullin a certa in department

,he instructs his

buyers,and they increase thei r buying

orders when certa in goods do not move_10_

Introducto ryhe knows there is l ittle demand (market )for them

,therefore

,he lowers h is prices

—offers inducements to poss ible purChasers .A floor trader who stands in one crowdall day is l ike the buyer for one department— he sees more qu ickly than anyoneelse the demand for that clas s o f goods

,

but has no way o f comparing it to thatpreva i l ing in other parts o f the store .

He may be trading on the long s ide o fUnion Pacific, which has a strong upward trend

,when sudden ly a break in

another stock w i l l demoral ize the marketin Union Pacific

,and he w i l l be forced

to compete w ith others who have stocksto sel l .The Tape Reader, on the other hand ,

from his perch at the ticker , enj oys ab ird ’s eye v iew o f the whole fie ld . Whenseriou s weakness deve lops in any quarter

,he i s qu ick to note , weigh and act .Another advantage in favor o f theTape Reader : The tape tel ls the new sminutes

,hours and days be fore the news

tickers,

.

or newspapers,and be fore it

can become current gossip . Everythingfrom a fore ign war to the pass ing o f adividend ; from a Supreme Court decis ion .

to the ravages o f the bol l Weevi l i s re

flected primari ly upon the tape .

The insider who knows a div idend isto be jumped from 6 per cent . to 10 percent . shows hi s hand on the tape when heattempts to tu rn his know ledge into dollars

,and the investor with 100 shares to

Man ipulation

Tape Reading

se l l makes h is fract ional impress upon itsmarket price .The market i s l ike a s low ly revo lvmg

wheel . Whether the whee l wi l l cont inueto revolve in the same d 1rection , standsti l l or reverse depends entire ly upon theforces which come in contact with itshub and tread . Even when the contactis broken

,and nothing rema ins to aff ect

its cou rse,the wheel reta in s a certa in im

pu lse from the most recent dom inatingforce , and revolves unt i l it comes to astandstil l or i s subj ected to other ihfiuences .

The engineers who harnessed N iagarahad a s imple task compared to that o fthe Tape Reader . The cataract whichhe undertakes to contro l seemingly hascross-currents and mae lstroms

,revers ing

its direction and de fying the law s o fgrav ity . To divert a portion o f this unruly Wall Street stream , to subj ect it tohis w i l l , seems l ike a task for a superman . Yet it can be done , for othershave done it

,

The element o f manipulat ion need notdiscourage any one . Manipulators aregiant traders

,wearing seven-leagued

boots . The tra ined ear can detect thesteady ‘‘clump, clump ,

” as they progress,

and the footprints are recognized inenormous quant ities o f stock appearingon the tape . L ittle fel lows are at l ibertyto tiptoe wherever the footprints lead

,

but they must be wary that the giants donot turn qu ickly and crush them .

_1 2_

Introductory

The Tape Reader has many advan

tages over the long swing operator . Henever ventures far from shore ; that i s ,he plays with a c lose stop

,never laying

himse l f open to a large loss . Accid entsor catastrophes cannot serious ly injurehim because he can reverse his pos itionin an instant, and follow the new-formedstream from source to mouth . As h ispos it ion on e ither the long or short s ideis confirmed and emphas ized

,he in

creases h i s l ine,thus fo l low ing up and

cumulating the advantage ga ined .

A s imon-pure Tape Reader does not

care to carry stocks over n ight . Thetape i s then s i lent, and he on ly knowswhat to do when it te l ls him . Somethingmay occur at midnight which maycrumple up his diagram o f the nextday ’s market. He leaves nothing tochance ; hence he pre fers a clean sheetwhen the 3 o

’clock gong strikes .By this method interest charges areavoided , reducing the percentage aga insthim to a considerable extent .The Tape Reader is l ike a vendor o ffru it who

,each morning, prov ides him

se l f with a stock o f the choicest andmosg seasonab le products , and for whichthere i s the greatest demand . He payshis cash and disposes o f t the goods asqu ickly as possib le

,at a profit varying

from 50 to 100 per cent . on "cost . Tocarry his stock over night causes a losson account o f spoilage . This correspondsw ith the interest charge to the trader .

Tape Read ing

The fru it vendor i s success ful becausehe knows what and when to buy, alsowhere and how to se l l . But there arestormy days when he cannot go out ;when buyers do not appear ; when he isarrested

,fined

,or locked up by a blue

coated d espot or hi s wares are scatteredabroad by a care less tru ckman .

Wal l Street w i l l readi ly apply theses ituat ions to the variou s att itudes inwhich the Tape Reader finds himsel f .

He ventures $ 100 to make $200, and asthe market goes in hi s favor h is risk i sreduced , but there are t imes when hefinds himsel f at sea

,w ith his stock dete

r iorating . Or the market is so unsettledthat he does not know how to act ; he iscaught on stop or held mot ion less in adead market ; he takes a series o f losses ,or is ob l iged to be away from the tapewhen opportunit ies occu r . H is calculations are complete ly upset by some un

foreseen event or his capital i s impa i redby overtrading or poor judgment .The vendor does not hope to buy a

barre l o f apples for $3 and sel l themthe same day for $300. He expects tomake from noth ing to $3 a day . He def

pend s upon a smal l but certa in profit,

which w i l l average enough over a weekor a month to pay h im for his time andlabor .This is the obj ect ive point o f the TapeReader— to make an average profit . Ina month ’s operations he may makeand lose —a net profit o f $500 to

_1 4_

Introducto ry

show for his work . I f he can keep thisaverage up,

trad ing in 100-share lots,

throughout a year , he has on ly to increasehis unit to 2 00, 300, and 500 shares ormore, and the results w i l l be tremendous .The amount o f capita l or the s ize o f

the order is o f secondary importance toth is quest ion : Can you trade in and outo f all k inds o f markets and show anaverage profit o f say per cent . perday ? If so

,you are proficient in . the art .

If you can trade w ith on ly a small averag e loss per day, or come out even , youare rapid ly getting there .

In th‘

é’

December TICKER there was setforth the record made by a trader whoseoperations showed 42 profits out o f 7 1trades

,the gross po ints profit being

aga in st 37% gross points loss . Thi s wasgood work

,although the commiss ions

and tax threw the net result over into aloss o f 6 points . We mention this merely to show the standard by which successin Tape Reading should be measured .

The trader who there disclosed theou tcome o f his efforts was not a TapeReader . He operated largely upon in

format ion and had no fixed method .

A Tape Reader abhors in format ionand follows a definite and thorough lytested plan

,which a fter months and

years o f practice becomes second natureto him . H i s mind forms hab its wh ichoperate automatical ly in gu iding his market ventures .

No intel l igent human need be told that

The Scalper

Tape Read ing

when the sky darkens and the thunderro l ls there ’ s l ikely to be a shower . Heunconscious ly notes the pre l iminarys igns

,dons a ra incoat and takes an um

brel la .

Long practice w i l l make the TapeReader ju st as proficient in foreca st ingstock market events , but his intu it ion w i l lbe rein forced by logic

,reason and analy

s is .Here we find the characteristi cs which

d i st ingu i sh the Tape Reader from theScalper . The latter is essentially onewho tries to grab a po int or two profit“withou t rhyme or reason”—he don ’tcare how

,so long as he gets it .

A Scalper wi l l trade on a tip,a look

,

a gu ess , a hearsay , on what he thinks orwhat a friend o f a friend o f Morgan ’ssays .The Tape Reader evolves h imsel f intoan automaton which takes note of a s itnation , we ighs i t, decides upon a courseand gives an order . There i s no qu ickening o f the pulse

,no nerves

,no hopes

or fears . The resu lt produces neithere lation nor depression . There i s equanimity before

,

“ during and a fter thetrade .The S calper is a bob-ta i led car with

‘rattl ing w indows

,a j ouncing motion and

a strong tendency to jump the track .

The Tape Reader is l ike a Pul lmancoach , which travel s smooth ly and steadi ly along the roadbed o f the tape

,acqu ir

ing direct ion and speed from the market-1 6

https://www.forgottenbooks.com/join

S eclus ion

Tape Read ing

market ; see in his mind’ s eye what i s

happening on the floor .He mu st have the nerve to stand a

series o f losses ; persistence to keep himat the work du ring adverse periods ; se l fcontrol to avoid overtrading and a phlegmatic disposition to bal last and balancehim at all times .For per fect concentration as a pro

tection from the tips,gossip and other

influences which abound in a broker ’soffice

,he should

,if poss ible

,sec lude him

sel f . A ' t iny room with a t icker,a desk

and private telephone connectfon withhis broker ’s office are all the faci l it ies requ i red . The work requ ires such del icatebalance o f the faculties that the s l ightestinflu ence either way may throw the resultaga inst the trader . He may say :“Noth ing influences me

,

” but uncon

sciously it does affect his judgment toknow that another man i s beari sh at apoint where he thinks stocks should bebought . The mere thought

,

“He may beright,

” has a deterring influence uponhim ; he hes itates ; the opportunity is lost .No matter how the market goes fromthat point, he has missed a cog and hismental machinery 1s thrown out o f gear .S i lence 1s a much needed lubr icant to theTape Reader ’s mindThe advisab i l ity o f having even a newsticker in the room

,i s a sub j ect for dis

cu ssion .

The tape tel ls the present and futureo f the market .

—1 8

Introductory

The news t icker records what has happened . It announces the cause for theeffect which has already been more orless felt in the market .Money is made in Tape Reading byanticipating what i s com ing— not bywa it ing t i l l it happens and going w iththe crowd .

The effect o f news is an entire ly di fferent proposit ion . Considerable l ightis thrown on the technical strength orweakness o f the market and specialstocks by their a ction in the face

,

o f im

portant news . For the moment it seemsto u s

'

that a news t icker might be ad

mitted to the sanctum , provided its whispering s are given on ly the weight towhich they are entitled .

To evolve a practical method—one

which any trader may u se in h is da i lyoperat ions and which those w ith varying proficiency in the art o f Tape Reading wi l l find o f value and assi stancesuch is the task we have set be fore u s

in th is ser ies . Perhaps we shall succeed ;perhaps not .We w i l l consider all the market factors o f v ital importance in Tape Reading ,as we l l as methods u sed by experts .

These w i l l be i l lu strated by reproduct ionsfrom the tape . Every eff ort w il l be madeto produce something o f definite , tangiblevalu e to those who are now operat ing ina hit—or-miss sort o f way .

News

Our Task

II. p r el iminary Su ggestions

HEN embark ing on any newenterpr ise

,the first thing

to consider i s the amount o fcapital requ ired . To study

Tape Reading “ on paper” i s one thing,but to practice and become proficient inthe art i s qu ite another . Almost anyonecan make money on imaginary trades

,

for these requ i re no risk o f any k indthe mind is free from the stra in whichaccompanies an actual venture ; fear doesnot enter into the situat ion ; pat i ence i sunl im ited .

All th is is changed when even a

small market comm itment is made . Thetrader o f s l ight experience suffers mental angu i sh if the stock does not instantly go his way ; he i s afra id o f a largeloss , hence h is judgment becomes warped , and - he closes the trade in order tosecure mental rel ie f .As these are al l symptoms o f inex

perience, they cannot be overcome byavo iding the issue . The brave and thebus iness-l ike thing to do is to wade r ightinto the game and learn to play it under conditions which '

are to be met and_ 20

P reliminary S uggestions

ccftquered be fore success can be at

tained .

After a complete absorpt ion of everyava i lable p iece o f educat ional wr it ingbearing upon Tape Reading, it is bestto commence trading in ten share lots ,so a s to acqu i re genu ine trading experi

ence . Th is may not su it some peoplewith a propens ity for gamb l ing, andwho look upon the ten-share trader a sa p iker. The average lamb withwants to commence with 100 to 500

share lots—he wishes to start at the topand work down . It is only a questiono f t ime when he w i l l have to trade inten-share lots .To us it seems better to start at the

bottom w i th ten shares . There is plentyo f t ime in wh ich to increase the uniti f you are success ful . I f success is noteven tual ly real ized you wi l l be many dollars better off for having ventu red them in imum quant ity.

It has already been shown in TH E

TICKER’ S Inqu iry Co lumn that the market for odd lots on the New York StockExchange is most satis factory, so thereis no other excuse for the novice whodesires to trade in round lots thangreed-o f-ga in , or get-rich-qu ick . Thinko f a baby, just learning to walk, beingentered in a race with profess ionalsprinters "In the prev ious chapter we suggested that success in Tape Reading should

Small

Po ints ,NotDo llars

Cap ital

Tape Read ing

be measured by the number of potfiprofit over points lost . For all practical pu rposes

,there fore, we m ight trade

in one-share lots, were there no obicetion on the part o f our broker, and i fth is quant ity were not so absurd ly smal las to inv ite careless execut ions . Ten

shares is really the smallest quantitythat should be ‘

considered , but we mention one share s imply to impress uponou r readers that in studying Tape Reading

,better keep in mind that you are

playing for points,not dollars . The do l

lars wi l l come along fast enough i f youcan make more points net than you lose .

The pro fessional b i l l iardist p laying fora stake a ims to ou t-point his antagon ist .After trading for a few months do not

cons ider the dollars you are ahead orbehind

, but analyze the record in points .In this way you r progress may be

' studied .

As the init ial losses in trading are l ikely to be heavy, and as the est imatedcapital must be a more or less arb itraryamount, we should say that units of$ 1 ,000 would be necessary for each tenshare lot traded in at the beginning .

_

This allows for 90 po ints more lossesthan profits

,and sti l l leaves margin

w i th which to proceed . Some peop lewil l secure a footing with less capital ;others may be obl iged to put up severalunits o f each be fore they beginto show profits ; stil l others w i l l spend afortune ( large or small ) w ithout mak ing

_2 2_

Preliminary S uggestions

it pay,or meet ing with any encourage

ment .Look over R . G . Dun Co .

’ s Causeso f Commercial Fa i lures , as recentlytabu lated in th i s magaz ine , and you w i l lfind the chie f causes to be : ( 1 ) Lack o f

capital,and ( 2 ) Incompetence .

Lack o f capital in Wall Street o perat ions can usual ly be traced to over-trad ing . This bears out the epigramOver-trading is financial su ic ide .” Itmay mean too large a quant ity o f stockin the

,

initial operations , or if the traderloses money

,he may not reduce the

s ize o f his trade to correspond withthe shrinkage in h is capital .To make our point clear : A manstarts trading in 100-share lots on 20

points margin . After a series o f losseshe finds that he has on ly $200 rema ining . This i s sti l l 20 points on ten shares ,but does he reduce h i s orders ? No . Herisks the $200 on a 50 or 100-share tradein a last desperate effort to recoup .

After be ing wiped out he tells his friendshow he “could have made money i f hehad had more capital .”

Incompetence really deserves firstplace in the l ist . Supreme ignoranceis the predom inant feature of both WallStreet lamb and seasoned specu lator . Iti s surpris ing how many people stayin the Street year a fter year

,acqu ir ing

noth ing more,apparently,’ than a keen

scent for tips and goss ip . Ask them a

Over-Trad ing

Igno rance

Tape Read ing

technical quest ion that smacks o f scien

tific know ledge o f the tape, and theyare unab le to reply .

Such fo lks are there for one o f

two reasons : They have either been“ lucky” or the i r margins are rep lenishedfrom some source outs ide of Wal lStreet .The proport ion o f commercia l fa i lures due to Lack o f Capital or Incompetence i s about 60 per cent . Cal l theformer by its Wal l Street cognomenOvertrading -and the percentage o f

stock market disasters traceable theretowould be about 90.

Success is only for the few, and theproblem is to ascerta in, with the m inimum expenditure o f t ime and money

,

whether you are fitted for the work .

These,in a nutshel l

, are the v ital quest ions up to this po int :Have you ' technical know ledge ofthe market and the factors which moveit ?Have you or more wh ich you

can afford to lose in an effort todemonstrate your ab i l ity at TapeReading?Can you devote your entire t ime andattention to the study and the pract iceo f this science ?Are you so fixed financial ly that youare not dependent upon your poss ibleprofits, and so that you wi l l not

‘suff erif none are forthcoming now or later ?

4

https://www.forgottenbooks.com/join

Tape Read ing

just in what momentary pos ition onestock or “ the market stands . The brokerwho i s not over-burdened with bus inesscan give this service ; he can also devote t ime and care to the execu tion oforders .Let me give an instance

~

o f how thisworks out in pract ice : You are long 100

Union,with a stop-order ju st under the

market price ; a dip comes and 100

shares sel l s at your stop price—say 164 .

Your care ful,and not too busy broker

stands in the crowd . He observes thatseveral thousand shares are b id for at164 and on ly a few hundred off ered atthe price . He does not sel l the stock,but wa its to see if it won ’t rally . Itdoes rally . You are given a new lease o fl i fe . This hand l ing o f the order maybenefit you $50, $ 100 or several hundred dol lars in each instance, and is anadvantage to be sought when choos inga broker .The house which transacts an activecomm iss ion bus iness for a large cl i ente leis unable to give this serv ice . Its stoporders and other orders not “close tothe market , mu st be given to Specialists, and the press o f bu s iness i s suchthat it cannot devote especial attent ionto the orders o f any one cl ient . Hence

,

i t would seem that our Tape Reader hadbetter search for a small commiss ionhouse which has one New York StockExchange member, an office partner andonly one or two employees .

—2 6

Preliminary Suggestions

The number o f clerks i s a good index to the amount o f bu siness done .

The ir fewness is not a reflect ion onthe strength , standing, or brokerageab i l ity o f the house . Some people are House

good brokers and have amp le capital ,but they do not understand ‘

the scienceo f bu s iness gett ing .

In

11“ op inbe le ft

W ?“

or less to himse l f and be free toconcentrate upon his task .

The‘

ticker shou ld be within cal l ingdistance o f the telephone to the StockExchange . Some brokers have a wayo f mak ing you or a c lerk walk a mi leto give an order . Every step means delay . The e lapse o f a few seconds mayresult in a ‘

lost market or opportunity .

I f you are in a smal l private room awayfrom the order desk

,there should be a

special te lephone connecting you withthe order clerk . P gnderonsn ice-wag

onmethods won ’t go in Tape Reading.

‘ N‘

Orders shoul di

g'

gneral ly be given atthe market.” We make this statementas a result o f long experience and ob

servation, and bel ieve we can demonstrate the adv isabi l ity o f it.The process o f report ing tran sactions

on the tape, as recently set forth inthese pages, consumes from five secondsto say five m inutes

,depending upon the

G iving Orders

Tape Reading

act ivity o f the market . For argument ’ssake, let us cons ider that the averag e

interval between the time a sa le takesplace on the floo r and the report ap

pears on the tape is hal f a minute .A market order in an act ive stock isusual ly executed and reported to the

customer in about two minutes . Ha l fth is time is consumed in putt ing yourbroker into the crowd with the o rder inhand ; the other hal f in writing out andtransm itting the report . Hence, whenUnion Pacific comes 164 on the tapeand you instantly decide to buy it, theperiod o f t ime between your decis ionand the execut ion of your order is as

fol lows :M inutes .

The tape is beh ind the marketT ime elapsed be fore broker can excoute the order 1

It wi l l there fore be seen that your decision is based on a price wh ich prevailed hal f a minute ago , and that you mustpurchase if you wi l l , at the price at

wh ich the stock stand s one m inute hence.Th is m ight happen between your de

cision and the execution of your order :

and yours m ight be the last hundred .

When the report arr ived you could notswear that it was bought at 164 be foreor a fter it touched Or you

8

Preliminary Suggestions

m ight get it at even though it

was 164 when you gave the order, and

when the report was handed to y ou .

Just as often the oppos ite wi l l takeplace—the stock wi l l go in your favor.In fact, the th ing averages up in thelong run, so that traders who do notgive market orders are hurt ing thei r ownchances .An infinite

‘

number of traders see ingUn ion Pacific at 164, wi l l say

”“Buy me a hundred atThe broker who is not too busy wi l lgo into the crowd, and , finding the stockat wil l report back to the office that “Union is V; bid .

”

The trader gives h is broker no creditfor th is serv ice ; instead , he cons iders ita s ign that h is broker

,the floo r traders

and the ins iders have all conspired tomake h im pay V; per cent. h igher forh is 100 shares, so he repl ies

“Let it stand at 164 . I f they don ’tgl

i

l

ve it to me at that, I won’t buy it at

a 3,How foolish " Yet. characterist ic ofthe style o f reasoning used by the publ ic. H is argument i s that the stock, forgood and sufficient reasons , is a splendidpurchase at 164 . At 164% or thesereasons are completely null ified ; the

stock becomes dear, or he cares more tofo i l the plan s o f th is “band of robbers”than for a poss ib le profit.I f a stock is cheap at 164 it

’s cheap at

_ 2

Tape Read ing

I f you can ’t tru st your broker, get another .If you th ink the law o f supply anddemand is altered to catch your $2 5 ,better reorganize your th inkery.

Were you on the floor you could probably buy at 164 the m inute it touchedthat figure

,but o f this there is no cer

ta inty . You would , however, be IV2m inutes nearer to the market . Yourcomm iss ion charges would also be praet i cally el im inated . Therefore, i f youhave seventy or eighty thousand dollars lying around the house wh ich youdo not especial ly need , buy a seat . I fyou have not, cease the uproar.A Tape Reader who deserves thename

,makes money in sp ite o f comm is

s ions,taxes and delays .

Arthur L ivermore used to trade solely on what the tape told him, clos ingout everything before three o ’clock . Hetraded from an office and pa id the regular comm iss ions , yet three trades out

of five showed profits . Hav ing madea fortune, he invested it in bonds andgave them al l to h is w i fe . Ant icipat ingthe 1907 pan ic , he put h is automobi le up for a loan of and withthis capital started to play the bear s ide,us ing h is profits as additional margin .

At one t ime he was short shareso f Union Pacific . H is whole l ine wascovered on one o f the panic days

,and

his net profits were a mi l l ion dollars "

Preliminary S uggestions

To return to the question o f giv ingorders : Anyone who says ,

“This stockshould be bought but I wi l l not pay V3above my price for it, i s l ike a manwho thinks he can make certa in moneyi f he could but get to Chicago . Arriving at the t icket office he finds that thefare i s $2 more than he expected , butthough wel l heeled , he refuses to paythe requ ired amount and abandons thetrip .

If you don’t get aboard your tra in ,

you ’ l l never arrive .G iving l imited orders loses more good

" dollars than it saves . We re fer , ofcourse

,to orders in the b ig, act ive stocks ,

where in the bid and asked prices areusually V3 apart . Especially is this truein clos ing out a trade . Many fool ishpeople are interm inably hung up becausethey try to save eighths by giv ing l im ited orders in a market that i s runningaway from them .

For the Tape Reader there is apsychological moment when he mustopen or close h is trade . H is order smust there fore be “at the market .”Haggl ing over fract ions wi l l make h imlose the thread o f the tape

,upset his

po ise and interrupt the work ings o f hismental mach inery.

In scale buying or sel l ing it is obv i

ous that l im ited orders must be u sed .

There are certa in other t imes when theyare o f advantage , but as the Tape

Tape Read ing

Reader general ly goes with the trendit i s a case o f “get on or ,

get le ft.”By al l means “get on .

”

This is an important matter, andshould be decided in a general way before one starts to tra de . Let ’s nosearound a l ittle and see what we canreason out .If you are trading in 100-share lots ,

your stock must move your way one

point to make $ 100 profit .Which class o f stocks are mostl ikely to move a po int ? Answer : Thehigh-priced issues .

Look ing over the records we find thata stock sel l ing around 1 50 wi l l averagepo ints fluctuat ion a day

,while one

sell ing at 50 will average on ly one po int .Consequently

,you have 2/2 times more

action in the higher priced stock.

The commiss ion and tax charges are

the same in both . Interest charges arethree t imes as large

,but this is an in

s ignificant item to the Tape Reader whocloses out h i s trades each day .

The higher priced stocks also covera greater number o f po ints during theyear or cycle than those o f lower price—Union Pacific from 19593 down topar (99 3 po ints ) , aga inst Steel commonfrom down to 2 1 7 3 ( 2 8V2 po ints )being recent strik ing examples . Stocksl ike Great Northern

,although en

j oying a much wider range , are notdesirable for trading pu rposes when upto 300 or more—fluctuations and b id and

https://www.forgottenbooks.com/join

U . S . Steel

St. Paul

Ama lgamatedCopper

Smelters

Tape Read ing

o f’ the stock i s shown in the fre

quency o f V1 point fluctuat1ons betweensales .It i s a very sat i s factory stock for TapeReading operat ions .

Steel common is lumbering in itsmovements , thu s reflect ing the five m i ll ion shares outstanding and the conse

quent w idespread pub l ic interest . It i suse fu l as a barometer o f the market ando f publ ic sentiment, but its swings . arerare ly w ide enough for the Tape Reader

,

as they average only about a po int aday .

St . Paul i s one o f the truest stocksfor trading purposes . It i s man ipu lated at t imes , but general ly it respondsautomatically to the sl ightest change inmarket temper . Its da i ly movements arewide

,about equal to Union Pacific and

Reading. Its last big sw ing was 106

po ints .

Amalgamated is at present on ly a secondary leader, and tak ing the yearthrough not nearly as sat is factory to

deal in as some o f the others above mentioned . Its sw ing in 1907 was about80 points .

Sme lters is one o f the most high lymanipulated issues on the l i st, errat ic,o ften difficu lt to follow , at other timeseasy. Its da i ly range is usually equalto any o f the others

,and its last big

sw ing was about 1 16 po ints . One getsplenty o f action in Smelters

,but not

nearly the steadiness nor the clearly de

Prelim inary S uggestion s

fined trend preva i l ing in the b ig ra i lroads .As a result o f observat ion and years

o f trading experience, we pre fer UnionPacific to any other, because of thequal it ies to which we have re ferred . Inits present range ( between 160 and 170)it i s be low the price warranted by itsdividend rate and equ it ies . This makesit especial ly responsive to bu l l i sh newsand better adapted for trading on th e

long s ide .If obl iged to choose a second stock ,Reading would appeal to us as offeringthe next greatest advantages . Whi leReading conta ins enormou s intrins icvalue it is at present a 4 per cent . stocksel l ing in the 1 3os—a price scarcely warranted if its rate were increased to 5per cent . So, for the time be ing at least,Reading affords the best medium for

short sel l ing.

These two issues are the ch ie f h ingeson which the door o f the market turns—Union the upper

,Reading the lower

h inge . It i s unnecessary for anyone togo beyond these except in times whenthe indu strials dominate the market ; inthis case , Amalgamated , Sme lters or

Steel w i l l replace them temporari ly .

It i s better for a Tape Reader to tradein one stock than two or more . Stockshave hab its and characteristics whichare as dist inct as those o f human beingsor animals . By a close study the traderbecomes intimately acqua inted with

B est S to cksfor the TapeRead er

Concentrate

Tape Read ing

these hab i ts and is ab le to anticipate thestock ’s action under given circumstances .

A stock may be stubborn,sens itive , ir

responsive , comp la i sant, aggress ive ; itmay dominate the tape or tra i l along behind the rest ; it i s whims ical and co

quettish ; it may whisper , babble l ike abrook or roar l ike a cataract . Its moodsmu st be studied i f you would know itand bend it to your wi l l .Study impl i es concentration . A per

son who trades in a dozen stocks at at ime cannot concentrate on one .The popu lar method o f trading (wh ichmeans the unsuccess fu l way ) is to say :

“I think the market ’s a sale . Smel

ters , Copper and St . Paul have had theb iggest rise lately ; they ought to havea good reaction ; sel l a hundred o f eachfor me .

”

Trades based on thinks seldom panout well . The selection of two or threestocks by guesswork instead o f one byreason and analysis expla ins many ofthe publ i c ’s losses . I f a trader wishesto trade in three hundred shares

,let

him sel l that quantity o f the stockwh ich he knows most about, or wh ichi s ent itled to the greatest decl ine . U h

less he is playing the long swing he injures h is chances by trading in a lot o fstocks at once . It ’s l ike chasing a droveo f pigs—wh i le you ’re watching this one

the other s get away.

Better to concentrate on one or twostocks and study them exhaust ively. You

Prelim inary S uggestions

wi l l find that what appl ies to one doesnot always fit the other : each must bejudged on its own merits . The varying price levels, volumes, percentage o f

float ing supply, investment values , themanipulation and other factors

,al l tend

to produce a different combinat ion ineach part icular case .

The B est

S tockNow

111. The Sto ck List An aly z ed

N the laSt chapter we re ferredto Un ion Pacific a s the most des irab le stock for active trading.

The “Analyst ‘ in forms us thathe once mad e a composite chart o f theprincipal active stocks

,for the pu rpose

o f ascerta in ing wh ich,in its da i ly fluc

tuations , fo l lowed the cou rse o f the general market most accurately . He foundUnion Pacific wa s what might be calledthe market backbone , whi le the others ,especially Read ing

,frequ ently showed

erratic tendencies,runn ing up or down ,

more or less contrary to the generaltrend . Of al l the i ssues under inspection , none possessed the al l-aroundsteadiness and general des irab i l i ty for

trading pu rposes d isp layed by Union Pacific .

But the Tape Reader, even i f he decides to operate exclus ively in ‘

onestock, cannot close his eyes to what i sgo ing on in others . Frequ ent oppor

tunities occu r e lsewhere . In proo f o f

th is,take the market in the early fal l

of 1907 : Union Pacific was the lead erthroughout the r ise from below 1 50 to

For three or four days be fore3 8

The Stock List Ana lyzed

this advance culminated , heavy sel l ingoccu rred in Reading, St . Pau l , Copper,Steel and Smelters

,under cover o f the

strength in Union . This made the tu rning point o f the market as clear asdayl ight . One had only to go short o fReading and awai t the break , or he cou ldhave played Union w ith a close stop ,know ing that the whole market wou ldcol lapse as soon as Union turned downward . When the l iqu idat ion in otherstocks was completed

,Union stopped ad

vancing ,the supporting orders were

withdrawn,and the “pre-election break”

took place . This amounted to over 20

po ints in Union,with proport ionate de

cl ines in the rest o f the l i st .The operator who was watch ing onlyUn ion would have been surprised atth is ; but had he v iewed the market asa comp lete organism he must have seenwhat was coming. Know ing the po int o fdistribu t ion, he wou ld be on the lookoutfor the accumu lat ion which must fol low

,

or at least the level where supportwould be forthcoming. Had he been expert enough to detect this , qu ick moneycould have been made on the subsequentral ly .

Whi le Union Pacific at present constitutes the backbone

,th is important

member i s on ly one part o f the .marketbody, which a fter all i s very l ike thephysical stru cture of a human being.

.

To get this po int clearly in m ind,let

us draw on our imaginations a l ittle

Sympath eticMovements

Tape Read ing

Union is strong and advancing ; suddenly New York Central deve lops an attacko f gout ; Consol idated Gas goes off on aspree ; American Ice becomes nauseat

ing ly weak ; Southern Ra i lway developstypho id ; Great Western cannot meet expenses, and is prostrated . There may benothing at al l the matter with the backbone

,but its strength w i l l be aff ected

by s ickness or excesses among the othermembers .A bad break may come in BrooklynRapid Trans it, occas ioned by some pol itical attack, or other purely local influence. This cannot poss ib ly aff ect thebus iness of the grangers , transcontinentals

,or coalers

,yet St. Paul

,Union , and

Reading decl ine as much as B . R. T . Aperson whose finger is crushed wi l lsomet imes fa int from the shock to h isnervous system, although the injuredmember wi l l in no wise affect the othermembers or functions of the body .

The t ime-worn i l lustration o f thecha in wh ich is as strong as its weakestl ink, wi l l not serve . When the weakl ink breaks the cha in is in two parts ,each part be ing as strong as its weakestl ink. The market does not break intwo

,even when it rece ives a severe blow .

I f someth ing occurs in the nature o f disaster

,whereby the money s ituation

,ih

vestment demand, publ ic sent iment, andcorporate earn ing power are deep ly a f

fected , a tremendous break may occur,but there is always a level, even in a

https://www.forgottenbooks.com/join

The B ig S ix

Tape Read ing

Four stocks out of the B ig S ix arechiefly influenced by the operations o f

what i s known as the Harriman-Standard Oi l party, the most active memberso f which are E . H . Harriman , Wi l l iamRocke fe l ler

,H . H . Rogers , and H . C .

Frick . Their four stocks are Union ,Reading

,St . Paul, and Amalgamated .

O f the other two,Smelters is hand led

by the Guggenhe ims , whi le Steel i s unquestionably swung up and down moreby the influence o f pub l i c sent iment thananything e lse . O f cou rse the conditiono f the steel trade form s the bas is of important movements in this i ssue, and

occas ionally Morgan or some other largeinterest may take a hand by buy ing orsel l ing a few hundred thousand shares

,

bu t,general ly speak ing, i t i s the attitude

o f the pub l ic which chiefly affects theprice o f Steel common . This should beborne strictly in mind

,as it is a valuable

gu ide to the technical pos ition o f themarket, wh ich frequently turns on theover-bought or oversold condition o f thepub l ic .Next in importance come what we

wi l l term the Secondary Leaders ; v iz ,

those which at t imes burst into great activ ity, accompanied by large volume .These are rightly termed SecondaryLeaders , because wh ile they seldom in

fluence the B ig S ix to a marked extent,

the less important issues usually fall into l ine at the i r in it iative.The principal Secondary Leaders are :

The Stock List Analyzed

AtchisonBalt imore OhioB rooklyn Rapid TransitColorado FuelConso l idated GasDelaware HudsonErieGreat NorthernNorthern PacificI l l inois CentralLou isv 1l le Nashvi l leM i ssouri PacificNew York CentralPennsylvaniaSou thern PacificSugarAnother group which we w i l l cal l theM inor Stocks i s comprised o f less important i ssues

,mostly low-priced , and

embracing many publ ic favorites , such

American Car FoundryChesapeake Ohio Minor StocksChicago Great WesternCo lorado SouthernDenver R io G randeInterboroughMex ican CentralM i ssou ri

,Kansas Texas

Nor fo lk WesternOntario WesternRepubl ic Iron SteelRock Is landSouthern Ra i lway '

Texas Pac ificWabash

M ino r StocksDoNot Lead

Tape Read ing

These groups are arranged sole ly withregard to their present speculat ive prominence, and the i r power to influence thegeneral market . Some people, whenthey see an advance inaugurated in someo f the M inor Stocks , such as ChesapeakeOh io

,Ontario Western , or Rock

Is land,are led to buy Pennsylvania

,

Reading and other Primary or Secondary Leaders

,on the ground that the

latter wi l l be bull ish ly affected . Th issomet imes occu rs ; more often it doesnot . It i s ju st as fal lacious to expect a —share operator to follow a100-share trader , or a 100—share manto be influenced by what the 10—sharetrader i s do ing.

The var ious stocks in the market arel ike a gigantic fleet o f boats, all hitchedtogether and being towed by the tugs“Money S ituat ion

,and “Bus iness Con

d itions . In the first row o f boats arethe B ig S ix ; behind them , the Secondary Leaders

,the M inors

,and the M i s

cel laneou s i ssues in the order named .

It takes t ime to generate steam and toget the fleet under way. The leadersare first to feel the impulse ; the othersfol low in turn . Should the tugs halt,the fleet w i l l ruh along for awhi le nu

der its own momentum , and there willbe a certa in amount o f bumping, backing and fi ll ing. In case the direct iono f the tugs is changed abruptly, thebumping i s apt to be severe . Obvious ly .

those in the rear cannot ga in and hold

The Stock List Ana lyzedthe leadersh ip without an all-around re

adjustment .The B ig S ix are representat ive ofAmerica ’ s greatest industries—ra i lroading

,stee l mak ing

,and mining. It is

but natural that these stocks should formthe principal out let to the country ’sspecu lat ive tendencies . The Union Pacific and St . Paul systems cover the ent ire West . Reading, o f itsel f a largera i lroad property, dom inates the coalmining industry ; it i s so inter laced withother ra i lroads as to typi fy the Easterns ituat ion . Steel is closely bound up withthe state o f general bus iness throughoutthe states

,whi le Amalgamated and

Smelters are the control l ing factors incopper m ining and the smelting industryIn order that we may consider the re

lationships of the pr incipal stocks on thelist , let us further d iv ide the act ive i ssues into groups .

TH E HARRIMAN GROUP .

*

Union Pacific,Reading

,Sou thern

Pacific,Atchison

,Erie

,I l l inois Central

,

Pacific Ma i l , Wheel ing and Lake Erie.

TH E STANDARD OIL GROUP .

Amalgamated Copper,Anaconda

,

Sugar, St. Pau l, Consol idated Gas , CornProducts , American Linseed , B rooklynUnion Gas .

‘Th e d ea th o f"

M r. Ha rr im an s ince th e a b oveh a s ch an g ed th ese g rou p s som ew h a t .

G roups

Tape Read ing

TH E MORGAN GROUP.

Atlantic Coast L ine,Hock ing Val ley,

Lou i sv i l le Nashv i l le,Southern Ra i l

way,U . S . Steel , General Electric, and

Mercanti le Marine .TH E PENNSYLVAN IA GROUP .

*P ennsylvan ia

,P ittsbu rg

,C in . Ch .

St . Lou i s , Baltimore Ohio,Chesa

peake Oh io, Nor folk Western .

TH E HILL GROUP .

Great Northern, Northern Pacific,Great Northern Ore Pac ific Coa s t .

TH E GOULD GROUPM i s sou r i Pac ifi c , D enver R ioGrande , T exa s Pac ific , Waba sh , We s tern Mary l and

,S t . Lou i s Sou thw e s tern ,

We s tern Un ion,and Colorado Fuel .

TH E VANDERB ILT GROUP .

New York Central , Northwest, C., C .,

C .,St . L . ; Lake Erie Western

,N .

Y Chicago St . L .,N . Y . Har lem

,

and Delaware Hudson .

TH E HAWLE v GROUP*.Colorado Sou thern

,M inneapol is

St . Lou is, Iowa Central , Toledo, St. L .

Western , Chicago Alton .

TH E MOORE GROUP .

Rock Is land, St . L . San Francisco,

American Can .

TH E CANADIAN PACIFIC GROUP .

Canadian'

Pacific, M inneapo l is, St.Pau l , S . S . Mar ie

, Duluth , South ShoreAtlantic .

‘C h esa p ea k e Oh io h a s s ince b ec om e a. Haw l eyp r op er ty .

_4 6_

Th e Stock List Analyzed

TH E GUGGENHEIM GROUP .

Am . Smelting, Nat ional Lead, UtahCopper .

TH ENEW HAVEN GROUP.

New Ha'ven,Ontario Western .

Arranged according to indu stries wehave the following :

STEEL STOCKS .

U . S . S tee l , Am . Stee l Foundrie s ,Bethlehem Steel , Co lorado Fuel Iron ,Great Northern Ore

,Repub l ic Iron

Steel,Sloss-Shefli eld , U . S . Cast Iron

P ipe Foundry.

EQUIPMENT STOCKS .Am . Car Foundry, Am . Locomo

t ive,N . Y . A i r B rake , Pre s sed S tee l

Car,Pul lman

,Ra i lway Steel Springs .

ELECTRICAL STOCKS .General Electric, West inghouse, All isChalmers .

COPPER STOCKS .Amalgamated , Anaconda

,Granby

,

Newhouse, Tennessee, Utah (Am . Smel

ters is also closely identified with thisindustry ) .

TELEGRAPH AND TELEPHONE STOCKS .Western Union

,Mackay Companies

,

Am . Telegraph Telephone .ANTHRACITE STOCKS.

Reading, Erie,Delaware

,Lack.

W e stern , Del aware Hud son , On tarioWestern . and Pennsylvan ia .

CHE M ICAL STOCKS .Am. Agricultural Chemical , V irginiaCarol ina Chemical , Am . Cotton Oi l .

Tape Read ing

The above are the principal groups .There are

, o f course, a number of independent ra i lroads

,such as M i ssouri

,

Kansas Texas , Kansas C i ty Southern ,Chicago Great Western

,and-Wiscons in

Central , bes ides local tract ion companies and comb ines , such as the RyanBelmont Group in New York C ity,inc luding Interborough-Metropol itan

,

Third Avenue , and Manhattan . Theseand other publ ic u t il i ty stocks

,such as

Peoples Gas , and Toledo Ra i lwayL ight

,etc .

,are governed by local con

d itions , and do not, as a rule, affect thegeneral l ist .

Industrials Large indu strial concerns l ike Am .

Sugar,Am . Woolen, International Pa

per,Internat ional Harvester , U. S . Rub

ber,etc . , are also affected principal ly by

the state o f their respective trades,and

car ry l itt le we ight otherw i se .

“

Hav ing cla ss ified the principal activestocks we can now recognize more Clearly the forces beh ind the ir movements .

For _instance, if Consol idated Gas suddenly becomes strong and act ive, weknow it wi l l probab ly affect BrooklynUnion Gas

,but there is no reason why

the other Standard Oi l stocks should ad

vance more than s l ightly and out o f sympathy . But i f al l the stocks in the Standard Oi l group advance in a steady and

fifgfigiiitl c

susta ined fash ion , we know that thesecapital i sts are engaged in a bul l campaign . As these people do not enterdeals for a few points it i s sa fe to go

_ 4 8_

https://www.forgottenbooks.com/join

Ind icators

Poo ls

Tape Read ing

rise commences in Atchison ( a Secondary Leader ) , the B ig S ix is about doneand distribut ion is tak ing p lace

,under

protection of the strength in Atchisonand others in its class . Sugar acts in as im i lar capacity for the Standard Oi lgroup . P ro fess ional traders call thesestocks Indica tors .

”

The Harr iman and Standard Oi l part ies work in harmony, the i r relationsin the various properties be ing closelyinterwoven .

The Morgan people are comparat ivelyinactive

,except at t imes when they turn

over immense quant it ies o f Stee l securities . We fee l sa fe in asserting that fewmanipulat ive orders emanate from thecorner o f Wal l and Broad . This is alsotrue o f the H i l l and Pennsy lvaniagroups

,except in rare instances

,when

bankers are bringing out new issues .The absence o f ins ide manipulat ionin a stock leaves the way open for poolsto operate , and many of the moves thatare Observed in these groups are produced by a hand ful o f floor or offi ceoperators, who, by jo ining hands andsw inging large quant it ies

,are able to

force the ir stock in the des ired direct ion .

Act iv ity in the Gould group is largely confined to M issouri Pacific and Colorado Fuel

,but the others are taken in

hand at t imes,with the exception o f

Western Union,wh ich is principally

held for investment .

The Stock List AnalyzedO f the Vanderbi lts, New York Central is the leader ; al l the others usual lytake the ir cue from it. Neglect is theprincipal market character ist ic of themajority of th is gr oup

,most o f the out

standing shares being locked up in safedeposit boxes . The principal moves aremade by those not identified with theVanderb ilts . ( It w i l l be noted that Wm .

Rocke fel ler,James Stil lman

,and some

o f the Morgan party are directors . )The “Junior” Vanderb i lts

,such as N .

Y. , Ch .,

St . L .,and Lake Er ie

Western are poor leaders, and generallyunsatisfactory stocks to watch , exceptas straws

,Showing the direction o f the

wind .

With the exception o f Chesapeake 8;Ohio and Colorado Southern

,the

Haw ley stocks cut very l ittle figure

their movements carry Sl ight s ignificance .

The Moore party ’s principal act iv itiesare confined to Rock Is land , the in

fluence o f which se ldom extends beyondits own control led properti es

.

The primary market for CanadianPacific is in London . The movementso f its American loop (M inn ., St Paul8: S . S . Mar ie ) , are not s ignificant . Duluth , South Shore Atlant ic i s givena run once or tw ice a year by the Canadian Pacific following hav ing its headquarters in MontrealThe Guggenheims are always act ivein Smelters , and the stock frequently Offers splendid trading opportunities . Lead

—5 1

The Pub lic

Tape Read ing

i s frequently used as a chaser, and

is o ften made active when Smelters hascompleted its run .

New Haven is ma inly held by NewEnglanders for investment. On tar ioWestern i s popular w ith small traders ;its movements deserve l ittle cons iderat ion .

U. S . Steel is swayed by condit ionsin the steel trade, and the speculat ivetemper of the general publ ic

,ass isted

occas ional ly by some o f the ins iders . Noother stock on the l ist is such a trueindex Of the attitude Of the publ i c, orthe technical pos it ion o f the market . Inc luding those who own the stock outright

,and those who carry i t on margin

,

probab ly a quarter o f a m il l ion peoplehere and abroad closely follow its movements . Weekly reports o f the steeltrade are most care fully scrutin ized, andthe corporation ’s earnings and orders onhand m inutely studied by thousands .

Th is great publ ic never sells its favorite short, but carries it

“pa id for,”or on margin unti l a profit is secured

,or

unti l it is shaken or scared out in a v io

lent dec l i n e . H ence,if th e s tock i s

s t rong under advers e new s , w e mayinfe r tha t pub l i c ho ldings are s trongly fort ified , and tha t confidenceabounds . If S te e l d i sp l ays more thani t s share o f w eaknes s , an untenab lepos i t ion o f th e pub l i c i s i ndicat ed .

The other steel stocks are dominatedby th e giant corpora t ion

,and seldom

furn i sh in d ica t ions o f value to the2

The Stock List Ana lyzed

Tape Readers,except a t the end of a

long ri s e .A t th i s po in t pub l i c s ent im ent b ecomes i nten s e ly bul l i sh and spreadsi t s e lf in the low-priced speculat iveshare s . Ins i ders i n the j un ior s t eels tocks take advantage o f th i s and areab le to advance and find a good market fo r their ho ldings .

The Equ ipment S tocks find theii

chi ef in sp i ra t ion in the o rders fo r carslocomotives , etc . p l aced by the ra i lroads . Thes e orders are dependentupon general bu s ine s s condi t ion s . Cons equent ly the equ ipment is sues cans e ldom b e expected to do more thanfo l low the trend of prosperi ty o r depres s ion .

We have thus introdu ced ours e lvesto the princ ipal specu l a t ive mediumsand the i r fam i l i e s

,each o f which , upon

c loser acqua i n tance,s eems to have a

sort of personal i ty : If we s tand in a

room w i th fifty or a hundred peop l e,al l o f whom w e know

,a s regards the ir

ch ief mot ive s and characteri s t ic s , w ecan form defin ite idea s a s to theirprobab le act ion s under a given s et ofci rcumstance s . Thi s would b e impos ~

S ib l e among strangers .SO i t become s the Tape Reader toacqua i nt h ims e lf w i th the most minutedeta i l s perta i n ing to the s e marketi dent i t i e s

,al so w i th th e hab i t s

,mo

f ives and method s Of th e men whomake the princ ipal moves on theS tock Exchange che s s-board .

Know ledgeof Details

E xpenses

IV . S top O rder s , Tr ading Ru les , 63d.

HEN a person con temp l a te san ex ten s ive trip

, one o f

the firs t th ings taken in toaccoun t is th e expen se

tha t wh ich cannot be avoided . Inplann lng ou r excu r s ion in to the realmsof Tape Read ing we mu s t

,therefore

,

care fu l ly w eigh the expen s es,or

,to

u s e a be t te r term,th e fixed charge s in

trading .

W' ere there no expen s es , profi t-ma

k ing would b e far ea s ie r—profitswould mere ly have to exceed los se s .

Bu t no ma t ter whether you are a memb er o f th e N ew York S tock Exchangeor n ot

,in actual trading profi t s mu st

exceed losses and expenses . Theseare in curred in every trade , whether itShow s a ga in ‘

01‘ a los s . They con s ist

of :

Commis s ion on 100 Share sInvi s ib le eighth ( see TICKER, Vol .

I,NO . 2

,p . 17 )

Tax on sal e

Stop Orders , Trad ing Rules , &c .

in addit ion to in tere s t if the trade iscarried over n igh t .By purcha s ing a N ew York Stock

Exchang e sea t , the commi s s ion can beredu ced to $1 per hundred share s ,bough t and sold the same day, or

$3 . 1 2V2 if carri ed over n ight . Th i s advantage is partly off set by interest onthe money involved

,dues

,assessments ,

etc .,which amount to nearly

per annum on a s ea t co s t ingThe inv i s ib l e e igh th is a factor

wh i ch no one— no t even a membercan overcome . Nor can the tax belegi t ima te ly avoided .

The Tape Reader who is a non

memb er mu st, therefore, real ize thatthe instant he g ives an order to golong or short 100 shares, he has lost

I n order that he may not foolh im sel f, he should add h is comm iss ion s to h is purchase pr ice , ordeduct them from his sell ing price immed iately. People

'

who boast o f thei rprofits u sual ly forget to dedu ct expen ses . Yet i t is th i s in s id iou s itemwh i ch frequen t ly throw s the net ‘

te

sul t over to the deb i t S ide .

The exp re s s ion is frequently heard ,I got out even , excep t the commiss ions ,” the speaker ev iden t ly scorn ingsuch a tr ifl ing con s idera t ion . Th i ssort o f s e l f-decept ion is ru inou s , as

w i l l b e s een by comput ing the fixedcharge s on I o trade s —or on 20

trade s“

B ear in m in d that a_ 5 5

The Invis ib leE ighth

Use ofS top Orders

Tape ‘

Read ing

los s of on the firs t trade leave sdoub le that amoun t—4 579—to be madeon the second trade before a dol lar ofprofit is secured .

I t therefore appears that the TapeReader ’s prob lem i s not on ly to el iminate los se s

,bu t to cover h is ex

pen se s as qu i ckly a s may be . I f he hasa coup l e of po in t s profit i n a longt rade , there is no rea son why he Shouldl e t the s tock run back be low h is net

buy ing p ri ce . Here c ircum stance sseem to cal l for a stop order, so thatno ma tter what happen s

,he wi l l not

be compel l ed to pay ou t money . Th i ss top Should not be thru st in when ne tco s t is too c lose to the market pri ce .React ion s mu s t be al lowed for .A Tape Reader is e s sen t ial ly one

who fol low s the immediate trend . Anexpert can read i ly di s t ingu i sh betweena change o f trend and a react ion .

When h is m en ta l barometer ind i cate sa change he doe s not wa i t for a s toporder to be caugh t , bu t c l ean s hou seor reverse s h is pos it ion in a tw inkl ing .

The stop order a t n e t co st i s , therefore

, o f advantage on ly in ca se of a reversal which is sudden , pronounced ,and w ith no forewarn ing .

A s top should al so b e p l aced if theoperator is ob l iged to leave th e tapefor more than a momen t , or if the t icker g e t s out of order . Wh i l e he ha s h i seye on the tape the market w i l l tel lhim what to do . The moment th is

3

https://www.forgottenbooks.com/join

Tape Read ing

sensus of shrewd and exper ienced traders i s in favor Of two po in t s max imum gros s lo s s on any one trade .

Th i s is purely arb i trary,however . The

Tap e Reader know s , a s a rule , what todo when h e is at the tape

,but if he

is separated from' the market by anycon t ingen cy , he w i l l be ob l i ged to fal lback upon the arb i t rary stop .

A c lo ser stop may be Obta in ed bynot ing the

“po in ts of re s i stan ce”—thel evel s at wh i ch the market turn s aftera react ion . For examp l e , if you are

short at 130 and the s tock break s to1 2 8 , ral l ie s to 1 2 9,

and then turn sdown aga in , the po in t of re s i stance is1 29 . In ca se o f temporary absence or

in terrup t ion to the serv i ce, a good

s top would b e 1 29% o r. The se“po in t s o f re s i s tan ce” wi l l be morefu l ly di s cu s sed l ater .I f th e op erator w i she s to u se an au

tomatic s top , a very good m ethod i sth i s : Suppose the in i t ial trade i smade with a one-po in t stop . For

every V3 the s tock move s in your favor,change the stop to corre spond , so thatthe stop

'

is n ever more nor l e s s thanone po in t away from the ext reme market price . Th i s gradual ly and auto

.

matica l ly reduce s th e ri sk . and if theTape Reader b e at al l sk i l fu l , h is profi ts mu s t exceed lo sse s . AS soon a s

the s top is thu s ra i sed to cover commis s ion s

,it would seem b e st not to

make i t automat i c thereafter . but l et-5 8

Stop Orders , Trad ing Rules, &c .

the market develop its own stop ors ig nal to ge t out.

One troub l e w i th th is k in d o f a s topis tha t i t i nterfere s with the free p l ayof judgmen t . A home ly i l lu s tra t ionwi l l exp l a in why : A tal l woman anda short man a t t emp t to cro s s a s tree t .An au tomob i l e approaches . Thewoman see s tha t there is amp l e t imein wh ich to cro s s

,bu t h e has her by

the arm and b e ing undecided h im sel f,back s and fi l l s

,first pu sh ing , then pul l

ing her by th e"

arm unt i l they final lyreturn to th e curb , aft er a ha i rbreadthe scape . Left to h erse l f, She wouldhave known exact ly what to do .

I t i s the same with the Tap e Reader . H e i s hampered by an automat i cs top . It is be s t tha t h e b e free to acta s h is judgmen t dicta t e s , without feeling compe l led by a prior re so l u t ion toact accordin g to a hard and fas t rul e .

There i s another t ime wh en the stoporder is o f valu e to the Tape Reader ,v iz . , when h i s ind ica t ion s are no t c l early defined . Th e orig inal commitmen tshould , o f course , b e made on ly whenthe trend i s po s i t ive ly indi ca t ed

,bu t

s i tua t ion s wi l l deve lop when he wi l lbe uncerta in whe ther to stand pa t ,c lose out, or reverse h i s pos i t ion . Atsuch

,

a t ime i t seem s be t ter to pu shthe stop up ‘

to a po int as close aspos s ib l e to th e marke t pri ce

,w i thou t

chok in g off the trade . By th i s wemean a rea sonab l e area should b e a l

Uncerta inty

Hes itation

Tape Read ing

lowed for temporary flu ctuat ion s . If

the s tock emerge s from its uncerta in tyby go in g in the de s i red d irect ion

,the

s top can be changed or cancel led . I fi t s trend become s adverse

,the trade

is automat i cal ly c losed .

Fear, he s i tat ion and uncerta in ty are

dead ly enem i e s of the Tape Reader .The ch ief cause o f fear is over-trad ing .

Therefore comm i tments should be no

g reate r than can be borne by one’ s

su scept ib i l i ty in th is respect .He s itat ion mu s t be overcome by

sel f tra in ing . To ob serve a pos it ivein d icat ion and not act upon it is fata l—more so in c los ing than in open inga trade . The appearan ce of a defin iteind ica t ion should be immed iately fo llowed by an order . Second s are oftenmore valuab l e than m inute s . TheTape Reader i s not the capta in—he isbut the engineer who control s themach inery . The Tape is the p i lot andthe engineer mu st obey orders withp romp tnes s and p rec is ion .

Uncerta in ty may be redu ced by theu se o f s top s a s above , or by c los ing atrade when ever one ’s course is not entirely c l ear .W e have defined a Tape Reader a s

one who fol lows the immediate trend .

Th i s mean s that he pursues the l ine ofleast res istance . He goes with themarket—he doe s not bu ck it . The opcra to r who oppose s the immed iatetrend p it s h is judgmen t and h is hun

Stop Orders , Trad ing Rules, &c .

dred or more Share s ag a in st theworld ’ s supp ly or demand and theweigh t o f its m i l l ion s of share s . Armedwith a broom , he is try ing to s tay thein com ing t ide .When he goes with the trend, theforce s of s upp ly, demand and man ipu

l at ion are work ing for and w ith h im .

A market wh i ch swing s w ith in a radins of a coupl e of po in t s cannot besa id to have a trend , and is a good onefor the Tape Reader to avo id . Thereason is : Un l e s s he catche s the extreme s of the l itt l e swings , he cannotpay comm i s s ion s , take occa s ionallos se s and come out ahead .No yachtcan w in in a dead calm . AS i t co stsh im near ly hal f a point to trade , eachr i sk should con ta in a probab l e two tofive points profit

,or it i s not ju sti

fied .

A mechan ical engineer, g iven theweight of an obj ect, the force of theb low which s tr ike s it, and the el emen tthrough which i t mu st pa s s , can fig u reapp rox imately how far the obj ect wi l lbe driven . SO the Tape Reader, bygauging the impetu s or the energyw i th wh ich a s tock s tart s and sus

ta in s a movemen t,dec ides whether i t

is l ike ly to trave l far enough to warran t h i s go ing w ith it—whether it wi l lpay it s expen se s and remunerate h imfo r h i s bo ldnes s .The ord inary t ip -trading speculator

gulp s a poin t or two profi t and d is

Tape Read ing

da in s a lo s s , un le s s i t i s b ig enough tostrahg le h im . The Tape Reader mu s tdo the oppos i te—he mu s t cu t ou t

every pos s ib l e e igh th los s and searchfo r chance s to make three , five and tenpo in t s . H e doe s no t have to gra spevery th ing tha t looks l ike an oppo rtu

mi ty . I t is not n ece s sary for h im to b ein th e marke t con t inuou s ly . H echoo se s on ly the be s t of what th e tap eOff ers .

H is or ig ina l risk s can b e gradual lyeff aced by C l ever arrangemen t o f stoporders when a s tock goe s h i s way . H emay keep the se in h is head o r pu t themon the floor . For my own part I prefer

,hav in g decided upon a danger

poin t,to ma in ta in a mental s top and

when the price i s reach ed c lo se th etrade a t the market . Rea son : Theremay be grou nd for a change o f p l an o r

Op in ion a t th e l a s t momen t ; if a s topi s on the floor i t take s t ime to can ce lor change i t

,hence there is a period of

a few m inu te s when the opera tor doe snot know where he s tand s . By u s ingmen tal s top s and marke t order s h e a l

ways know s where he s tand s , excepta s regard s th e price s at wh ich h i s o r

ders are execu ted . The ma in con s iderat ion i s

,he know s whether h e i s in or

out.

The p l acing of s top s i s mos t effectu a l and s cien t ifi c when indica ted bythe market itse l f . An example o f thisis as follows

Stop Orders , Tra d ing Ru les, &c.

H ere a s tock,flu ctua t ing between

1 2 8 and 1 2 9 ,gives a bu ying ind ica t ion

a t Obviou s ly , if th e indica t ioni s tru e

,the pr ice w i l l not aga in b reak

1 2 8 , hav ing met buying sufficien t lyStrong to turn i t up tw i ce from tha tfigure and a th i rd t ime fromThe fact that i t d id not tou ch 1 2 8 onthe l a s t down sw ing foreca s t s a h igherup sw ing ; i t show s tha t th e downwardpres sure was no t so strong and thedemand s l igh t ly more urgen t . In

other word s, th e po in t of re s i s tancewas ra i sed Hav in g bought .at

—6

S top ra ised to1 2 9 93 .

—B uy ln g p o int ,1 2 8 134 .

Tape Read ing

1 2 894 , the stop is p laced at ‘

1 2 7i

7/3 .

wh ich is V; below the l a s t po in t of res istance.

The stock goe s above its p rev iou s-top and cont inue s to 13094 .

At any t ime after it ha s cros sed 130

the operator may ra ise h is stop toco st p lu s comm i s s ion The

s tock reacts at then con t inue sth e advance to above 1 3 1 . As soon a sa n ew h igh po in t is reached the s topis ra ised to 1 29 5 3 , as 1 2 9% wa s thepo in t o f re s i stance on the d ip .

I n such a ca se the in it ia l risk wasV3 p lu s comm is s ion s , etc . , the marketgiv ing a wel l defin ed stop po int , mak ing an arb itrary s top not on ly nu

necessary but expens ive. The i l lustration i s g iven in chart form , but theexperienced Tape Reader general lycarr ie s the se sw ings in his head . Aser ie s of h igher top s and bottom s aremade in a p ronounced up swing andthe reverse in a down swing .

Arb itrary stop s may , of course , beu sed at any t ime , e special ly if one

wi she s to'

cl inch a sub s tan t ial profit,but un t i l a stock gets away from thepr ice at wh i ch it was en tered

,i t seems

b e s t to u se the s tops it develop s foritse l f.I f the operator is Shaken out of h is

ho lding s imm ed ia te ly after en teringthe trade

,i t doe s not prove h is judg

men t in error . Some acciden t mayhave happened

,some un toward devel

https://www.forgottenbooks.com/join

Tape Read ing

ered final or inflexib l e . I t is not oura im to a s sume the role of an ora c l e .Rather, we are reason ing th ings out

on paper,and as we p rogre s s in the se

studie s and apply the se ten tat ive rulesto the tape , in actual or paper trad ing,we shal l probab ly have occa s ion to ‘

modify some o f our conc lus ion s .

A Tape Reader mu s t c lose a trad e( 1 ) when the tape tel l s h im to c lose ;(2 ) when h i s stop is caught ; (3) whenh is po s it ion is not c l ear ; (4 ) when hehas a large or sat i sfactory p rofit .The firs t and mo st important rea sonfor c los in g a trade is : The tape saysso . Th i s in d i ca t ion may appear in va

rions form s . A s sum ing that one i strad ing in a l eader l ike Un ion Pacificor Reading , the warn ing may come inthe stock i t sel f. ‘With in the r ibbon of

sal e s recorded on the tap e , there run sthe fine s i lken thread o f the trend . I tis c l ear ly d i st ingu i shab l e to one suffi

c iently versed in the art o f TapeReading

,and , for reason s prev iou s ly

expl a ined, is most readi ly Ob served inthe l eaders . Hence when one is shortof Un ion Pacifi c and th i s thread sud

den ly in d icate s that the market hastu rned upward , it is fol ly to remainshort . Not on ly mu st one cover qu i ckly,but i f the power o f the movemen t

is sufli cient to warran t the r isk, the

operator mu s t go long . I n a marketof suffi cien t b readth and sw ing , theTape Reader w i l l find that when i t is

w e6

Stop Orders, Trading Ru les, &c .

t ime to c lose a trade, it i s usual ly t imeto reverse h is po s it ion . One musthave the flex ib i l i ty of whalebone, anden terta i n no r ig id op in ion . He mu stobey the tape impl i c i t ly .

The in d icat ion to c lose a trade maycome from ano ther stock, severals tocks or the g eneral market . For examp l e

,on January 4th th i s year, the

day o f the Suprem e Court dec is ion inCon sol ida ted Gas , suppose the operator w as l ong Of Un ion Pac ific a t 1 1

o ’c lock,hav ing pa id therefor 182 94 .

B etween 1 1 and 1 2 O ’c lock Un ionral l ied to and Reading, whichw as more act ive , to 144 . Ju st before .and immed iately aft er, the noon hou r,tremendou s tran sact ion s took p l ace inRead ing

,over shares changing

hands w i th in three-quarters of a po in t .The se may have been l argely wa shsale s , accompan ied by in s i de sel l ing ;i t i s impos s ib l e to tel l . I f they werenot, the inference i s that con s iderab l ebuy ing power developed in Reading atth i s l evel and wa s met by sel l ingheavy enough to supp ly al l b iddersand preven t the stock advancing above14494 . Large quan t i t ie s com ing w ithin a smal l range in dicated e i ther one

o f two th ings : ( 1 ) That con s iderab l ebuying power sudden ly developed atth is po in t, and the in s iders chose tocheck i t or to take advan tage Of theopportun ity to un load . (2 ) The demonstration in Reading may have been

Tape Read ing

intended to distract attention fromo ther stock s in which large operatorswere un loading . (There is no spec ialev i dence of th i s, except inNewYorkCen tral .)I f the sel l ing is no t suffi c ient to

check th e upward move , the marketfor Reading -wi l l absorb al l that is o f

fered and advance , now or l a t er, to ah igher l eve l , but in th i s ca se the sel l ingwa s more eff ectual than the buy ing

,

and Reading fe l l back,warn ing the

operator that the temporary l eader onthe bul l S ide o f the market had metw i th defeat .I f a stock o r the whole market can

no t be advan ced , the a ssumption is

that it wi l l dec l in e—a market se ldomstand s st i l l . At th i s po in t the operatorwas

,therefore , on the lookout for a

S l ump .

Reading sub s ided , in smal l lot s , backto Un ion Pac ific , after s e l l ingat dec l ined to Bothstocks developed dul lne s s

,and the

who l e market b ecame more or l e s sw i thout feature .

Suddenly Union Pacific cameindicat ing not

on ly a lack of demand , but remarkab ly poor suppor t . Immedia te ly follow ing th i s , New York Cen tral , wh i chso ld on ly a few minute s before 400.

13 1V.) came

Th i s demon strated that the marketwas remarkab ly hol low and in a pos i

_ 3 3_

Stop Orders , Trad ing Rules, &c.

tion to develop “ great weakness . Thel arge quan t i t ie s Of New York Cen trala t the low fig u re, after a runn ing dec l ine of a po in t and one-half, showedthat there w as not on ly an absence o fsupport ing orders

,bu t that sel lers

were ob l ig ed to make great conce ss ion s in order to dispose of the ir holding s . The quan t it ie s , e spec ial ly inv iew of the narrowne s s o f the marke t ,proved that the sel lers were not smal lfry .

Coupled with the wet b l anket put onReading and the poor support i n Un

ion Pac ific,th i s weakne s s in New York

Cen tral wa s another advance not i ce o fa dec l in e . On any further ind icat ionhe mus t be ready to jump out of h islong s tock and get short o f the market .Wh i l e wa it ing for h is cue , the TapeReader ha s t ime to con s ider wh i chs tock among the l eaders is the mostde s irab l e for sel l ing

* w

de'

velopstf'

weason

W

T heouts i b l ie general ly buys on ju stsuch bulg e s a s the one has taken p lace in Read ing . g e vo l

ume , even if accompan y on ly afract ional advance , has the effect o f

mak ing the ord inary trader in ten selybul l i sh , th e reSu lt b e ing that h e b itesoff a lot. of long

'

sto ck a t the top Of the’

—69

B uying

Tape Read ing

bulge . Th i s i s exact ly what the manipu lator wi she s h im to do . We haveal l heard peop le boas t tha t the i r purcha se wa s at th e top e igh th and tha tit had th e eff ect of turn ing the stockdown . Tho se who make the ir purcha se s after th i s fa sh ion are qu i cke s tto become scared at the firs t appearance of weakne s s , and throw overboard what they have bought . Inchoo s ing Reading, therefore , th e TapeReader is p i ck ing out th e s tock

,

inwh ich he is l ikely to have the mos thelp on the bear S i de .

A t the market i s standing st i l l ,the maj ori ty o f tran sac t ion s be ing insmal l lot s and at on ly fract ionalchanges . Reading shows the effect o f

the recen t un load ing . I t i s com ing out

The opera tor real ize s tha t Reading is p robab lya short sale r ight here

,w ith a stop or

der at I 44V2 or -On the groundthat the bul l s mu s t have an extraor

d inary amoun t of l aten t buy ing powerin order to pu sh the stock above itsformer top , where, at every e igh th ad

vance over 144 94 , they wi l l encountera con s iderab l e port ion Ofshare s . Th i s reason ing, howe ver, i sal l as ide from our ma in arg ument ,wh i ch is to Show how the cue to g etout wi l l be g iven

‘

by s tocks other thanthat in wh i ch the op erator is work ing .

Un ion Pacifi c Shows on the tape ' in

small lots at New York Cen_ 70

Stop Orders , Trad ing Rules, &c.

tral The re st of themarket seem s to have al l the snap andginger taken out of i t and the operatordoe s not l ike h is pos it ion on the longS ide . He has no defin ite ind icat ion tose l l short

,however

,but feel ing that

his chance s on the long s ide have beenreduced to pract i cal ly n i l by the weakundertone of the market, he thereforegets out of his Un ion Pacific andwa its unt i l the tape tel l s h im to sel lRead ing short.

Union Pacific weakens toThe others s l ide off fract ional ly . Theweakne s s i s not pos it ive enough toforeca st any big break, so he con t inue sto wa it . There are 1800 share s of Umion altogether at followed by3000 at 182V2 . Other stocks respondand the market looks more bear ish .

Consol idated Gas comes163 . Th i s is the firs t S ign o f act iv i tyin the stock, but the move is noth ingunu sual for Gas , as its fluctuat ion s aregenerally wide and erratic . The balance of the l ist ral l ie s a fract ion . Gas

comes At thispo in t Gas , wh ich ha s been very dul lhereto fore, now forces itsel f, by its dec l ine and weaknes s , upon the not i ce o fthe operator . He begins to look uponthe stock as the poss ible shears whichwi l l cut the thread Of the market andl et everyth ing down .

—Gas 500. 16 1V2 It i s veryweak . The balan ce of the l i st i s

Clo s ing Out

The Th rust

Tape Read ing

steady , Union Pacific Central13094 , Reading 14394 . There is afractional ral ly Union Pacific to182 93 and Gas to 162 . Plenty o f Central for sale around 130 ; Reading is

The ral ly peters out. There is agradual weaken ing al l around

,but the

Tape Reader cannot go with the trendunt i l h e is sure of a b ig swing . Central comes 1 2994 , showing that : a fteral l the buyers a t 130 are fi l l ed up cons iderab le stock is st i l l for sale . ‘Theothers Show on ly in smal l lots . Themarket i s on the verge of a dec l ine ;it i s where a pu sh or a j ar o f any sortw i l l s tart i t down . Un ion Pac ific isheavy at Reading

Central 2000. 13o .800.

IA.

H ere is the thru st he has been looking for" Gas160V2 .4OO. IOO l He wa its no longer,bu t give s an order to sel l Read ingShort at the market . They are al l onthe run now , Reading 143Vz .6oo .94 .

Central 13o . 1 29% , Gas 500,Something very rotten about

Gas and it’s a c in ch to se l l it short ifyou don

’t m in d trad ing i n a buz z-sawstock .

‘

The market b reak sg

so rap id ly thathe does not get over 142 94 for h isReading , but he is short not far fromthe

,top Of what looks l ike a wide open

break.

_ 7

https://www.forgottenbooks.com/join

Tape Read ing

mat ion to s ift through telephone'

and

te l egraph w ire s and reach them by theroundabout way o f news t ickers orword o f mouth , are work ing under atremendou s handicap .

That not even the in s iders knewwhat the deci s ion w as to be is shownin the dul lne s s of the s tock . al l morning . Tho se who heard the dec is ion inthe Sup reme Court chamber doubtle s sdid the doub l e-qu i ck to the te lephoneand sold the stock short . The i r salesshowed on the tape before the new s arrived in New York . Tape Readers were,there fore , first to be not ified . They wereshort be fore the Street knew what hadhappened .

V V o lum es'

and Their Sign ifican ce

S the whole Obj ect O f these studies is to learn to read what thetape says

,I wi l l now expla in a

po int wh ich is probably one o f

the most valuable in the pra ctice o f theart. This must be known and understoodbe fore we proceed

,otherwise the explan

ations cannot be made clear .F irst o f all, we must recogn ize thatthe market for any stock—at whateverlevel it may be—is composed of twos ides

,represented by the b id and the

a sked price . Please remember that thelast sale i s something ent irely differentfrom the market price. I f Steel has justsold at 50, this figure represents whathas happened . It is history. The market price o f Steel is e ither or

The bid and asked pricescombined form the market price.

This market price is l ike . a pa i r o fscales , and the volume o f stock thrownby sellers and reached for by purchasersshows toward which s ide the prepon

derance o f we ight has momentari ly shi fted . For example, when the tape shows

Advantage o fthe Leaders

Tape Read ing

-I/8

the market price is and the largevolumes are on the up s ide. In thesefour transactions there are 700 sharesso ld at 50 against taken at so

l/é,

prov ing that at the moment the buy ingis more urgent than the sell ing. The deduct ion here to be made is that Steelwi l l probably sel l at 5OV; before 4993.

There is no certa inty in this , for supplyand demand is chang ing with every second , not on ly in Steel but in every otherstock on the l ist .Here is one advantage in trading inthe leaders . The influence o f demand orpressure is concentrated or at leaststrongly fe lt in the principal stocks . Thehand o f the dom inant power, whether itbe an in s ider, an outs ide man ipulator orthe publ ic, is shown in these volumes .

Especial ly is this true in the p ivotalstocks, l ike Union Pacific, Reading andothers, which are general ly used by theHa rriman and Rocke feller part ies . Thereason is s imple. These big fellows cannot put the i r stocks up or down withouttrading in enormous amounts . In an ad

vancing market they are ob l iged to reachup for or bid up the ir stocks

,as

, for example :

Vo lumes and Their S ign ificance

1 82 1000 . 1 82 . 1 500 V3

2 00V; 3500 . 2 000 IA

In a case l ike the fol lowing,Union

Pacific i s be ing bought on a decl inewhenever round lots come into the market :

U

Take the opening and subsequenttransact ions in American Locomot ive oneday last fal l

_7 7

E xamples

Propo rtiona lVo lumes

Tape Reading

Here the opening market price was4694 and the buyers o f 200

shares “at the market” pa id the highprice . All b ids at 4694 were then fil led .

This i s proved by the next sale,wh ich i s

at The b ig lots therea fter aremostly on the down s id e , showing thatpressure sti l l ex isted . The indicat ionswere , there fore , that the stock would golower . A lot o f 1900 shares in a stockl ike Locomot ive is a large lot ; in UnionPacific it would be o f frequent occurrence , even in comparatively dull markets .Volu

et,as

_y_v_elLasparticular is;

sue . ru le can be establ i shed.I

T

55 76" seen a Tape Reader make money

by fol low ing the lead o f a I ooo-share loto f Northwest wh ich

'

someone took at afract ion above the last sale . Ordinari lyNorthwest i s a s luggish investment stock

,

and this s ize lot appeared as the forerunner o f an ac t ive specula t ive demand .

Now let us see what happens on thefloor to produce the above-described ef

feet on the tape —let us prove that ourtheory is correct . A few years ago thecontrol o f a certa in ra i lroad was beingbought on the floor o f the New YorkStock Exchange . One hou se was givenall the orders, w ith instructions to distribu te them and conceal the buying asmuch as poss ible . The original order

Vo lumes and Their Sign ificance

for the day would read, Take everything that is Offered up to 38 . As 38was about 3 po ints above the market o f .

the day be fore,th is le ft cons iderab le lee

way for the broker to whom the buyingorder was entrusted .

He would instruct h i s floor broker asfol lows : “The stock c losed last n ightat 35 . You take everything Off ered upto 35V2 and then report to me howthings stand . Don ’t b id for the stock ;just take it as it i s offered and mark itdown whenever you can .

”

In such a case the floor member standsin the crowd awa it ing the opening. Onthe instant o f ten o ’c lock the cha i rman ’sgavel str ikes and the crowd begins yel ling. Someone offers “

2000 at an e ighth .

Another broker says “F ive for five hundred . Our broker takes the 2000 at V3 ,then offers it at 1 3 himsel f, so as to keepthe price down . Others then off er one

or two hundred shares at V3 , so he withdraws h is Off er , as he wishes to accumulate and only offers or se l ls when it helpsh im buy more, or puts the price down .

The b uyer at 35 has 300 shares o f h i slot cancelled , so he alters his_b id to “

35for two hundred .

” The other sel lerssupply him and he then bids “

73 for a

hundred .

” Our broker sells h im 100 atjust to get the market down . Some

one comes in with “a thousand at five .”Our broker says , “I ’ l l take it .” F ivehundred more i s offered at V3 . Th is healso takes.

Tape Read ing

Let uS see how the tape records thesetransact ions

2 000 3 5V3 2 00 3 5 34778

The Tape Reader interprets thisOpening bid and asked price was probab ly 35@V3 ; someone took the large lotat the high price . The two sales following were in small lots

,showing l ight

pressure . The a ftershows that on the 7 3@5 market the buyer took the stock at the off ered price andfol lowed it up by tak ing 500 more atthe e ighth . The we ight is on the ups ide and it does not matter whether thebuyer i s one indiv idual or a dozen

,the

momentary trend i s upward .

To get the oppos ite s ide,let us suppose

a manipulator is des irous o f depress inga stock . This can be accompl ished byOffering and sell ing more than there is ademand for, or by coax ing or frightening other holders into throw ing over thei rshares . It makes no difference whosestock i s so ld ; “The Lord is on the s ideo f the heav iest battal ions ,

” as AddisonCammock u sed to say . When a manipulator puts a broker into a crowd withorders to mark it down , the broker suppl ies al l b ids and then Offers it down tothe obj ect ive po int or unti l he meets re

https://www.forgottenbooks.com/join

Res istance

Tape Read ing

showing"

that at 79 there was a demandfor more than he was wil l ing to supply( there m ight have been shareswanted atFrequently a broker meeting such an

obstacle wi l l leave the crowd long enoughto ’phone h is principal . H is departu reopens the way for a ra l ly, as the stocki s no longer under pressure

,and the large

buying order at 79 is someth ing for floortraders to fall back on . So those in thecrowd bid it up to V2 in hopes o f scalping a fract ion on the long side .Take another case where two brokers

are put into the crowd—one to depressthe stock and the other to accumulate it .They play into each other ’s hands

,and

the tape makes the fol lowing report o fwhat happens

X

Vo lumes and Their S ign ificance

Were we on the floor we should seeone broker offering the stock down ,wh i le the other grabbed every round lotthat appeared . We cannot tel l how fardown the stock wi l l be put, but whenthese indicat ions appear , it makes uswatch closely for the turn ing po int, whichis our t ime to buy.

So far as the Tape Reader is con

cerned,he does “

not care whether themove is made by a manipulator, a groupo f floor traders, the publ ic or a combinat ion o f all .The figures on the tape represent theconsensu s o f opinion, the effect o f manipu lation and the supply and demand , al l

combined into concrete units . That iswhy tape indications are more rel iablethan what anyone hears, knows or

thinks .With th is idea o f the pair o f scalesclearly implanted in our m inds

, we scanthe tape, mental ly weigh ing the leader sin our effort to learn on which s ide thetendency is strongest . Not a deta i l mustescape our notice . A sudden demand ora bu rst o f l iqu idation may enab le u s toform a new plan , revise an old one or bidus wa it.These volume indicat ions are not a iways clear. Nor are they in fal l ible . It

does not do to rely upon the indicationso f any one stock to the exclus ion of therest . There was a t ime , in September,1908 ,

when certa in stocks (Union andReading

,if memory is

,correct ) were be

3

Tape Read ing

ing ru shed up,whi le the volume indica

t ions in the other active stocks showedclear ly that they were being distributedas fast as the market would take them .

This happens very frequently on a largeor small scale . Especially is it apparentat the turning po int o f a big swingwhere accumulat ion or distribut ion te

qu ires some days to complete.Volumes can be studied from the re

ports printed in the New York E veningS un or the Wall S treetJournal, but thereal way to study them is from the tape .I f one is unable to spend five hours aday at the tape wh i le the t icker is in opcration, he can arrange with one o f theboys in h is b roker ’s offi ce to wind thetape up each day and save it for h im .

This is done most expedit ious ly by us ingan automat ic ree l

,which can be had at

any store where telegraph instrumentsare sold . The tape can then be takenhome and studied at leisure . A secondreel in the study makes it easy to um

wind,a fter wh ich . the tape can be made

to run across one ’s desk just as thoughit were coming from the t icker .In study ing under these condit ions do

not let yoursel f be dece ived as to yourabi l ity to make money on paper . Imaginary trades prove noth ing in TapeReading. The way to test your powersis to get into the game . Let it be on assmal l a scale as you l ike, but make actualtrades with real money.

There are t imes when the forego ing

Vo lumes and Their S ignificance

rule o f volumes indicates almost the re

verse Of what we have expla ined . Oneo f these instances was described in our

last chapter . In this case the transact ions in Reading sudden ly

,swelled out

of al l proport ion to the rest o f the market and its own prev iou s volume . Notw ithstanding the predom inance o f apparent demand

,the res istance Off ered

(whether legitimate or art ificial ) becametoo great for the stock to overcome, andit fel l back from 144 93. On the wayup these volumes alone suggested a pu rchase, but the tape showed abnormaltransact ions accompanied by poor re

sponse from the rest o f the l ist . Th issuggested manipulat ion and warned theoperator to be caut ious on the bull s ide .The volume in Reading was susta inedeven a fter the stock reacted , but thelarge lots were ev idently thrown over at

the bid prices . On the way up the volumes were near ly all on the up s ide andthe small lots on the down s ide . After

was reached the large lots wereon the down s ide and the small lots onthe up .

It is just a s important to study thesmall as the large lots . The smallerquantit ies are l ike the feathers o n anarrow—they ind icate that the bus inesspart o f the arrow i s at the other end . Inother words

,the smaller lots keep one

constantly in formed as to what fract ionforms the other s ide o f the market . Toi l lustrate : During the first five trades in

Th e SmallLots

Tape Read ing

12 Li

5000 144

2000.

. 144yg

. 14453

. 14434. 14453. 144

. 144

144

. 14393

Tu rn ing point in Reading. morning ofJan . 4. 1909

the day of the Consolidated G as col lapse

Reading, recorded above, the marketquotat ion is shown to have beenit then changed to and aga in to

On the way down it got to be4@V3, and at th is level the smal l lotswere particular ly valuab le in showingthe pressure wh ich ex isted .

Stocks l ike Union and Reading usuallymake this sort o f a turn ing po int on avolume o f from to 50,000/shares .That is

,when they meet with oppos ition

on an advance or a decl ine it must be in86

Vo lumes and Their Sign ificance

some such quant ity in order to stem thet ide .Walk into the hi l ly country and you

w i l l probab ly find a small r ivulet running qu ietly on its way . The stream is sot iny that you can place your hand in itscourse and the water wi l l back up . Infive m inutes, however, it overcomes th i sres istance by go ing over or around yourhand . You fetch a shovel , p i le d irt inits path

,pack it down hard and say,

“There,I ’ve dammed you .

” But youhaven ’t at all

,for the next day you find

you r pi le o f dirt washed away . Youbring cartloads o f dirt and bu i ld a substantia l dam ,

and the flow is finally heldin check .

It i s the . same w ith an indiv idual stockor the market . Prices fol low the l ine o fleast res istance . I f Reading is go ing upsomeone may throw shares in itspath without percept ible effect. Anotherlot o f shares fol lows ; the stockhalts, but finally overcomes the Obstacle .The seller gives another order—th is t ime

shares more are thrown on the

market . I f there are shares wanted at that level , the stock wi l l breakthrough and go h igher ; i f on lyshares are needed to fil l all bids

,the

price wi l l recede because demand hasbeen overcome by supp ly.

It looks as though someth ing l ike th ishappened in Reading on the occas ion re

ferred to . Whether or not manipulat iveorders predominated does not change the

_3

Tape ReadingVolume Study in Union Pacific. Show ingShares Sol d fr om 149% to 150. Cheek ing

i

‘

the

1 47 94 1 4001 47 94 1 6001 4 6 94 2000"s l d1 47 5001 4 6 94 2001 46 94 2001 46 94 1 4001 47 10001 47 94 2001 47 94 10001 47 94 4001 4 7 94 10001 47 94 6001 4 7 8001 46 94 2 1001 47 2001 47 94 2 8001 47 94 1 4001 47 94 4001 47 94 21001 4 7 94 9001 47 94 10001 47 94 1 8001 47 94 7001 47 94 4001 47 94 2 5001 47 94 1 3001 47 94 12001 47 94 5001 47 94 4001 47 94 28001 4 7 94 5001 47 94 1 2001 4 7 94 3 5001 47 94 9001 47 94 3001 47 94 7001 4 7 94 1001 47 94 4001 47 94 4001 47 94 1100

2001 47 94 2001 47 94 8001 47 94 4001 47 94 1 3001 4 7 94 1 5001 4 7 941 4 7 941 4 7 94 3001 47 94 9001 47 94 2200

1 2 M

1 4 7 94 1 6001 47 94 1 9001 47 94 1 700

1 47 94 1 1001 47 94 2001 4 7 94 6001 47 94 1001 47 94 6001 47 94 1001 4 7 94 1 2001 47 94 1001 47 94 1 7001 4 7 94 2 4001 4 7 94 1001 47 94 7001 47 94 1001 47 94 1001 47 94 1 1001 4 7 94 1 6001 4 7 74 1001 4 8 7001 47 94 5 7001 48 4 4001 47 94 1001 48 1 5001 48 94 2 5001 4 8 94 1 3001 4 8 94 1 1001 4 8 1 6001 48 94 1 6001 48 1 4 1 1001 48 94 6001 48 94 3001 48 94 6001 48 1 4, 8001 48 94 5001 4 8 94 10001 48 94 1 2001 48 94 5001 48 94 32001 48 94 6001 4 8 94 8001 4 8 14 1001 48 94 8001 4 8 94 9001 48 94 1 7001 48 94 2 6001 48 94 1001 48 94 1001 48 94 300

1 1 A M1

1381 4 8 1714 5001 48 931 48 531 48 96 1001 48 34 7001 48% 100

https://www.forgottenbooks.com/join

A Live Tape

Tape Reading

aspect o f the case . In the final shuffl ingthe weight was on the down side .The publ ic and the floor traders do notstand aside whi le the manipu lator is atwork, nor is the reverse true . Everybody ’s stock looks al ike on the tape .The ticker plays no favor ites .When a stream breaks through a damit goes into new territory . Likewise thebreaking through o f a stock is significant ,for it means that the resistance has beenovercome . The stronger the resistancethe less l ikel ihood of finding further ohstacles in the immediate vicinity—damsare not usually bui lt one behind theother . So when we find a stock emerging into a new field it is best to go withit

,especial ly i f, in breaking through it,

it carries the rest o f the market along.

While much can be learned from thereports printed in the da i l ies mentionedabove , the tape itsel f is the only real instruction book . A l ive tape is to b epre ferred

,for the element o f speed with

which the ticker prints is no small face a

condition o f the market .o f ‘ W-Jor 1nsta

‘

n'

ce, during a decl ine, i f theticker is very active and the volume of

‘

sales large , voluntary or compu lsoryl iquidation is indicated . This is emphasized i f

, on the subsequent ral ly, the tapemoves sluggish ly and only small lots appear . In an active bu l l market the tickerappears to be choked with the volume of

Vo lumes and Their Sig nificance

sales poured through it on'

the advances,but on reactions the quantities and thenumber o f impressions decrease until ,l ike the ocean at ebb tide

,the market is

almost li feless .Another indication o f the power o f amovement is found 1n the differences between sa les o f active stocks, for example :

U

This shows that there was only 100

shares for sale at 180A, none at al l atand on ly 500 at I80% . TheJump

from to 94; emphasizes both the ab

sence o f pressure and persistency on thepart o f the buyers . They are not content to wa it patiently unti l they can secure the stock at I 8O%1 ; they reach forit

,and , finding themselves clutching the

a i r, are obl iged to reach higher . Thesame thing on the opposite side showslack o f support .Each indication is to be j udged not somuch by rule as according to the cond itions surrounding it . The tape fu rnishesa continuous series o f motion pictures

,

with their respective explanations written between the printings . These are ina language which is foreign to all butTape Readers, but anyone can learn aforeign lang uage.These volumes which we have beendiscussing are least l iable to misleadwhen manipulation prevails, for the

_ 9

Jumps

E fl'

ect ofManipu lation

Tape Readingmanipu lator is ob l iged to deal in largeblocks o f stock

,and must continual ly

show his hand . A complete manipulative operation on the long side consistso f three parts : Accumulation, markingup, and distribution . In the case o f ashort operation the distribution comesfirst, then the ma rk down and the accumu lation . No one of these three sectionsis comp lete without the other two . (Forfu l l deta i ls see my series on Man ipu lations in Vols . I and 2 of TH E TICKER. )The manipulator must work with alarge block o f stock or the deal wi l l notbe worth his time

,the risk and expenses .

The Tape Reader must,there fore

,be on

the lookout for extensive operations oneither side o f the market . Accumu lationwi l l show itsel f in the quantities and inthe way they appear on the tape . Hav

ing detected the accumu lation,the Tape

Reader has only to watch its progress ,ho lding himsel f in readiness to take onsome o f the issue the moment the marking-up period begi ns . He does not buyit at once , because it may take weeks ormonths for the manipu lator to completehis l ine ; also, there might be opportunities to buy cheaper . Holding o ff unti lthe psychological moment forces someone else to carry the stock for him- topay his interest, so to speak . Furthermore

,his capital is le ft free in the mean

time .When the marking up begins he getsin at the commencement o f the move, and

_9z

Vo lumes and Their Sig nificance

goes a long with it til l there are signs o fa

’

halt or distribution . Having passedthrough the first two periods, he is in aposition to fu l ly benefit by the thirdstage o f the operation . In this sort o fwork a figure chart, which I described inVo l I of TH E TICKER

,will help him

,es

pecially i f the manipu lative operation iscontinued over a considerable periodit wi l l give him a bird ’s-eye view of thedeal , enabl ing him to drop or resume thethread at any stage .

S trong

V I. Market Techniqu e

N Saturday morning, February2 7th , the market openeds l ight ly higher than the prev iou s night ’s c lose . Reading

was the most active stock . After touching 1 2 3V; it sl id off to at whichpoint it invited short sales . This indication was emphasized at 1 2 2 , at andaga in at 1 2 1 . The downward trend wasstrongly marked unti l it struckthen fol lowed a quick rally of I I/é

Thi s was a vic ious three-point jabinto a market which was only j ust recovering

"

from th e February break.

What was its eff ect on the other princ ipa l stocks ? Union Pacific d ecl inedonly 94 , So uthern Pacific and Stee l

This proved tha t they were techn ica l ly s trong ; that i s, they were inhands which cou ld view with equanim

ity a three-point break in a leadingissue . Had this drive occurred whenReading was around 145 and Union 185the effect upon the others wou ld probablyhave been very diff erent .

Market Technique

In order to determine the extent ofan o re body , miners use

'

a diamonddri l l . Th is produces a core , the character of which shows what is beneaththe surface . If i t had been poss ib le tohave dri l l ed into the market at the topof the recent rise

,we shou ld have found

that the bu lk of the floating supp ly inStee l , Reading and some others washeld by a class of traders who buyheavi ly in booms and on bu lges . Thesepeop le operate with a comparativelysma l l supply o fxmarg ins , nerve and experience . They are exceedingly vu lnerab le, hence the stocks m which theyoperate suffer the greatest decl ineswhen the market receives a jar . Thefigures are interesting.

Points1907

-9 Feb

’

y,’

09Advance . Break .

U. P .

‘

1 2%Reading 2 6%Steel 36A 16%

The above shows th at the pub l i c washeavily extended in Steel

,somewhat

less loaded with Reading, and w as carrying very l ittle Union Pacific . Inother words

,Union showed technica l

strength by its res istance to pressure,whereas Reading and Stee l offered l ittle o r no opposi tion to the dec l ine .

Both the ma rket as a who le and individual stocks are to be j udged as much by

5

Tape ReadingA Three-po int B reak in Reading w hich had l ittle

effect u pon the other leadere. proving the markettechnical ly strongB ead ing C o . 2 100

1 700 1 2 3 300200 2000500 1 2 3

500 1 2 2 36 1 7001 300 1 2 3 200500 6001 900 1 2 3 56, 1001 500 1 2 3 36 2 700200 1 2 3K 1008 1d .

400 1 2 3 56 2001 100 1 2 3 4001 200 1 2 3 116 1 400300 1 2 2% 2001 500 1 2 2 % 4001 400 1 2 2 % 11001 200 1 2 2 % 100100 1 2 2 55 1003000 1 2 2 55 700200 1 2 2 96 1 400700 1 2 2 % 700100 1 2 2 56 7002000 1 2 2 % 1400500 1 2 2 56 100200 1 2 2 % 900100 1 2 2 54, 2000500 1 2 2 100100 1 2 2 15 500800 1 2 2 14, 500100 1 2 2 % 1500100 1 2 2 35 800600 1 2 2 % 600700 1 2 2 54, 4001 200 1 2 2 115 300100 1 2 2 % 800100 1 2 2 116 200100 100100 1 2 2 % 1 3002 100 1 2 2 54 1 600400 1 2 2 600300 1 2 2% 700500 1 2 2 34 2000200 1 2 2 55 1001 500 1 2 2 1 500200 1 2 2% 100100 1 2 2 2001 900 1 2 2% 2001 600 1 2 2 200100 1 2 2% 1000500 1 2 2 1 700100 1 2 1 % 2001 500 1 2 2

“

100300 1 2 1 % 1 600500 1 2 1 % 1 1001 500 . 1 21 3‘ 500

6

1 1 A M 200

1 2 1 34 200 1 20361 2 1 36 500 1 20361 2 1 36 1 200 1 2 1

1 20361 2 1 34 100 1 20341 2 1 36 600 1 20361 2 1 34 1000 1 2 1

1 2 1 36 700 1 2 1 341 2 1 34 400 1 2 1 361 2 1 36 900 1 2 1 341 2 1 36 400 1 2 1 361 2 1 34 700 1 2 1 341 2 1 36 1000 1 2 1 361 2 1 36 600 1 2 1

1 2 1 34 1000 1 2 1 141 2 1 1 100 1 21 361 2036 1000 1 2 1 341 2 1 200 1 2 1 361 2036 100 1 2 1 361 2036 200 1 2 1 361 2036 300 1 2 1 361 2036 1 200 1 2 1 361 2034 500 1 2 1 361 2036 1 500 1 2 1 341 2036 1 200 1 2 1 361 2034 500 1 2 1 341 2036 200 1 2 1 961 2034 800 1 2 1 361 2036 Un . P a c . Ry .

1 2036 1 500 1 7 7

1 2036 500 1 7 6 361 2034 1 900 1 7 7

1 2036 700 1 7 6 361 2034 700 1 7 7

1 2036 600 1 7 6 361 2026 500 1 7 7

1 2036 1 500 1 7 7 361 2036 1 200 1 7 7 341 2036 1 200 1 7 7 361 2036 200 1 7 7 541 2034 600 1 7 7 361 20 300 1 7 7 341 2036 1 100 1 7 7 261 20 900 1 7 7 361 1 9 36 2 400 1 7 7 361 20 200 1 7 7 1741 2036 100 1 7 7 361 20 700 1 7 7 341 2036 500 1 7 7 261 1 9 36 1 300 1 7 7 211 20 200 1 7 7 261 1 9 36 1 200 1 7 7 361 20 1 700 1 7 7 261 2036 2000 1 7 7 341 2036 200 1 7 7 36

https://www.forgottenbooks.com/join

Tape Readingwhat they do as what they do not do atcritica l points . I f the big fel lows whoaccumulated Union below 1 20 had distributed it above 180, the stock wou ldhave broken someth ing l ike thirtypoints, owing to its having passed fromstrong to weak hands . As it did nothave any such dec l ine, but on ly a verysma l l reaction , compared to its ad

vance, the Tape Reader in fers that Unionis dest ined for much h igher prices ;that i t off ers comparative immunityfrom dec l ines and a poss ib le large ad ~

vance in the near future .This shou ld not be taken as a prediction . Even were Union Pacificscheduled for a thirty-pomt r1se in thenext two weeks

,something might hap

pen to-morrow to postpone the cam

J[I

J‘

a ig n fo r a cons iderab le t ime . But theape Reader must work with thesebroader cons iderat ions in fu l l view . Hehas just so much time and capital andthis must be emp loyed where it w il lyie ld the greatest resu lts . If by watching for the most favorab le Opportunities he can operate with the trend ina stock which wi l l some day or weekshow him ten points profit over anyother i ssue he cou ld have chosen, he isincreas ing his chances to that extent.A long advance o r dec l ine us uallya -r

H r c l , “ fifl 0‘

culmmates m a qu1ck movementin the leaders . Take the break of Feh?ua 1’y

'

23d last : Reading dec l ined from1 2 8% to 1 18 and Steel from 46 to 4 1%

Market Technique

in one day . Southern Pacific, aftercreeping up las t fa l l from 97 to 1 1 2 ,

reached a cl imax in a seven-point j umpduring one session . Instances are so

numerous that they are hardly worthcit ing. The same thing happens in themarket as a who le— an exceptional lyvio lent movement, after a protractedsag or ri se, usua l ly indicates its culminat ion .

A stock general ly shows the TapeReader what it proposes to do by itsaction under pressure or stimu lat ion.

For examp le : On Friday, February19th ,

1909 , the United States Stee l Cor‘

poration announced an open market instee l products . The news was out .Everybody in the country knew it bythe fol lowing morning. The TapeReader, in weighing the situation beforethe next day ’s opening

,wou ld reason

“As the news is publ ic property , thenormal thing for Steel and the marketto do is to ra l ly . Steel c losed last nightat 4896 . The market h inges upon thisone stock . Let ’s see how it acts .

”

This is down from last night ’s clos1ng

—a perfectly ~ 4 1atura l occurrence in

Cu lminations

An Interest1ng Contest

Tape Readingview o f yesterday’s announcement . The

real test o f strength or weakness wil l follow . For the first ten minutes Steelcomes

without otherwise varying.

Eighteen times the price swings backand forth between the same fractions .Meantime

,Union Pacific

,which opened

at shows a tendency to ral ly andpu l l the rest of the market up behind it .

Can Union l i ft Stee l ? That is thequestion . Here are two opposing forces

,

and the Tape Reader watches l ike ahawk for he is going with the marketin the direction o f the trend . Union is .

up from the opening and SouthernPacific is rein forcing it .

But Stee l does not respond . Not oncedoes it get out o f that rut—not

even a single hundred shares se lls at 48 .

This proves that it is freely offered at47A and that it possesses no rallying

—100=

https://www.forgottenbooks.com/join

Liquidation

-T5pe Reading

The pressure on Steel increases at thelow leve l .

Successive sales are made,as fol lows :

36

From this time on there is a steady flowof long stock . Reading and Pennsyl

vania are the weakest rai lroads . Colorado Fuel breaks 7 p6 ints in a runningdecline and the other steel stocks fol lowsuit . U . S . Steel is dumped in bunchesat the bid prices

,and even the dignified

pre ferred is sympathetical ly affected .

The market closes at the bottom ,

with Stee l at 46 , leaving thousands ofstockho lders of Steel in a thorough lyfrightened state, their accounts weakened by the dec l ine and a ho l iday aheadfor them to worry over.It looks to the Tape Reader as thoughthe stock wou ld go lower

i

on the fo llowing Tuesday . At any rate, no covering indicat ion has appeared, and un

less i t is h is i nvariable ru le to c loseevery trade each day, he -puts a stop at47 on hi s short Stee l and goes his way .

(His original stop was

—102

Market Technique

Stee l opens on the fo l lowing sess ionat and during the day makes

There are a number of lessons to bedrawn from this episode . The marketis a tug-o ’

-war . Successfu l tape reading requires abil ity to j udge which s idehas the greatest pul l ing power and one

must have the courage to go with thatside . There are critical points whichoccur in each swing, j ust as in the l i feof a bus iness or of an individual . At

these j unctures it seems as though afeather ’s weight on either s ide wou lddetermine the immediate trend . Anyone who can spot these points haseverything to win and l itt l e to lose , forhe can always p lay with a stop p lacedc lose behind the turning point or pointof res istance .If Union had cont inued in its upwardcourse, ga ining in power, volume andinfluence_,as it prog f éssed , the d i re effects o f the Stee l situation might havebeen overcome . It was simply a question of pu l l ing power

,and Stee l pu l led

Union down .

This stud of responses is one of themost valuab e in the Tape Reader ’s educat ion . It is an almost unerring gu ideto the technical posi tion of the m arket .Of course , a l l responses are not c learlydefined . It is a matter of i ndiff erenceto the Tape Reader as to who or whatproduces these tests

,or critical periods .

They constantly appear and disappear ;—103

Responses

The Turn in 3.

Rock Is land

Tape Read inghe must make his diagnosis

,

and actaccordingly . If a stock is being manipu lated higher, the movement wil l seldom be continued un less other stocksfol low and support the advance . Ifthe pub l i c i s in contro l of a stock

,the

other i ssues shou ld be watched to see

whether large operators are unloadingon the strong spots .

’

Should a stockfa i l to break on bad new s . i t means thatins iders have ant icipated the dec l ineand stand ready to buy.

A member of a syndicate once sa idto me

“We are going to disso lve to-morrow.

”

“Wi l l there not be cons iderable se l ling by peop le who don ’t want to carrytheir share of the securit ies ?” I asked .

“We l l ,” he rep l i ed,

“we know how

every one stands . Probablyshares w i l l come on the market from afew members who are ob l iged to se l l,and as a few of us have so ld that muchshort in anticipat ion, we

’ l l be there tobuy it

,when the t ime comes .”

Th i s rem inds us that it is we l l tocons ider the ins ider ’s probab le att itude on a stock . The tape usual ly ind icates what th is is . One of the muckraking magaz ines recently showed thatRock Island pre ferred had been drivendown to 2 8 last

.

August, to the accompaniment of rece1versh1p rumors . The

writer of the art ic le was unab le to

prove that these rumors originated with—104

https://www.forgottenbooks.com/join

Th e B roadMovements

Tape Read ingup a s tock and drive the shorts tocover. With these and other operationsgoing on all the time, the Tape Readerwho is at al l expert is se ldom at aloss to know on which side his bestchances l i e . Other peop le are doingfor h im what he wou ld do himse lf if hewere a l l-powerfu l .Wh i le it is the smal ler swings thatinterest him most, the Tape Reader mustnot fa i l to keep his bearings in relation to the broader movements of themarket . When a panic preva i ls he recog nizes i n it the b irth of a bu l l marketand operates with the certa inty thatprices wil l gradual ly rise unti l a boommarks the other extreme of the swing.

In a bu l l market he cons iders reactionso f from two to five points normal and ‘

reasonable ; he looks for occasional dropsof 10 to points i n the leaders , with a2 5

-point reak at least once a year .When any of these occur, he knowswhat to look for next .In a bu l l market he expects a drop of

IO points to be fo l lowed by a recoveryof at least half the decl ine, and i f therise is to continue

,al l of the drop and

more wil l be recovered . I f a stock orthe market re fuses to rally naturally,he knows that the trouble has not beenovercome

,and therefore looks for a

further dec l ine .Take American Sme lters , whichmade a top at 99 5 8 last November, thens lumped off under rumors of competi

—106

Market Technique

tion until it reached 78 . Covering 1n

d ications appeared around"

Hadthe operator also gone long here , hecou ld confidentl

§7

8%have expected Smel

ters to ral ly to The decl ine having been 2 1% points, there was a ra l lyo f 1094 points due . As a mattero f record the stock did recover to

Of course, these th ings . are meregu ide posts, as the Tape Reader

’s actualtrading is done only on the most positive and promis ing indications ; butthey are valuable '

1n teaching h im whatto avoid . For instance

,he wou ld be

wary about maki ng an initial short saleof Smelters after a 15-point break, eveni f his indications were clear. Theremigh t be several points more on theshort s ide, but he wou ld rea l ize thatevery point further decl ine wou ldbring h im closer to the turni ng point ,and a fter such a violent break the sa festmoney was on the long s ide .Another instance : Reading so ld on

January 4th ,1909, at 14496 . By the

end of the month it touched andon February 2 3d broke ten points to1 18 . This was a dec l ine of 2 496 points ,al lowing for the 2 per cent . dividend .

As previous ly stated , the stock lookedl ike an attractive short sale , not on lyon the first breakdown“

, but on thefinal drive . The conservative traderWould have wa i ted fo r a buying indication

, g s there would have been less-107

Guide Posts

Tape Reading

ri sk on the long side . The‘ e lement ofsafety is as important as any other.It is se ldom that the market runs

more than three or four consecutivedays in one direct ion without a reac

tion,hence the Tape Reader must rea l ize

that his chances decrease as the swingis prolonged .

The da i ly movements off er h is bestopportunit ies ; but he must keep instocks which swingwide enough to enable h im to grab a profit .I t is an astonish ing fact, and onewhich we have never before seen inprint

,that there i s a market cyc le which

runs almost exactly one hour.

Watch it for yourse lf when next atthe ticker, and you wi l l find that if anupward movement cu lminates atthe reaction usua l ly w il l

’

last t i l land the apex of the next up sw in

wi l l occur about thirty minutes l ater .I have actual ly stood watch in hand,having decided what to do , wa i ti ng forthe high or low moment on which tose l l or buy, and have often h it with ina fraction of the best obta inab le figure .Why th is is I do not attempt to expla in

,but it happens very o ften .

I have frequent ly used this idea as atest o f the market ’s strength or weakness

,i n th i s way : If a decl i ne ended

at a certa i n mom ent and the subsequentral ly on ly lasted ten minutes , insteado f the normal ha l f hour, I wou ld com

—108

https://www.forgottenbooks.com/join

S itters

V II. Du ll Markets and Th

Oppo rtun ities

ANY people are apt to regard adu l l market as a ca lamity.

They cla im :“Our hands are

tied ; we can’

t get out o f whatwe

’

ve g ot ; i f we could there’d be no use

getting in aga in,for whatever we do we

can ’t make a dollar .”

Such people are not Tape Readers .They are Sitters . They are B il l ikensex-grin .

As a matter o f fact, du l l markets o ffer innumerable opportunities and wehave on ly to dig beneath the crust ofprej udice to find them .

Du lness in the market or in any specialstock means that the forces capable o f

influencing it in either an upward or adownward direction have temporarilycome to a balance . The best i l lustrationis that o f a clock which is about rundown— its pendulum gradual ly decreasesthe width of its swings unti l it comes toa complete standstil l thus :

Du l l Markets and Their Oppo rtunities

How the market pendu l um comes to a standstil lNow turn this on its side and you seewhat the chart o f a stock or the marketlooks l ike when it reaches the point o fdulness .These dul l periods occur most fre

quently a fter a season o f de l irious activity on the bu l l side . People make money,pyramid on their profits and glut themselves with stocks at the top . As everyone is loaded up

,there is comparatively

no one le ft to buy,and the break which

inevitably follows would happen i f therewere no bears, no bad news or anythingelse to force a decl ine .Nature has her own remedy for dis

sipation . She presents the débauchéwith a thumping head and a moquettetongue . These tend to keep him quietunti l the damage can be repa ired .

So with these intervals o f market rest .Traders who have placed themselves in aposition to be tr immed are du ly trimmed .

They lose their money and ( temporarily) their nerve.“

The market, there fore ,becomes neglected . Extreme dulnesssets in .

—1 1 1

Tape Read ingI f the h istory o f the market were to

be written , these periods o f l i felessnessshou ld mark the close o f each chapter .The reason is : The factors which wereactive in producing the ma in movement

,

with its start, its climax and its col lapse,have spent their force . Prices

,there

fore, settle into a groove, where they re

ma in sometimes for weeks or unti l a ffected by some other powerfu l influence .

When a market is in the midst o f a bigmove, no one can tel l how long or howfar it wi l l run . But when prices are stationary, we know that from this pointthere wi ll be

'

a pronounced swing in onedirection or another .There are ways o f anticipating the direction o f this swing. One is by notingthe technical strength or weakness o f themarket

,as described in a previous chap

ter . The resistance to pressure mentioned as characteristic o f the du l l periodin March

,19o9, has been fol lowed by a

pronounced r ise,and at this writing the

leading stocks are many po ints higher.This is particu lar ly true of Reading, inwhich the shakeouts around 1 2 0 (one o fwhich was described ) were frequent andpositive . When insiders shake otherpeople out it means that they want thestock themselves . These are good timesfo r us to get in, for then we wi l l enjoyhaving Mr . Frick and his friends workfor us .

-11 2

https://www.forgottenbooks.com/join

Tape Readingfor scalping purposes , with the intentiono f holding part o f his line for a longswing, using the rest for regu lar trading.

As the stock drew away from his purchase pr ice he cou ld have ra ised his stopon the lot he intended to hold

,putting a

mental labe l on it to the effect that it isto be sold when he detects inside d istribution . Thus he stands to benefit to thefullest extent by any manipu lative workwhich may be done . In other words

,he

says : “I ’ l l get out o f this lot when Mr ..Frick and his friends get out of theirs .”

Accumu lation He feels easy in his mind about thisstock

,because he has seen the accumu

lation and knows it has rel ieved the market o f a l l the floating supply at about thisleve l .This means a sharp

, qu 1ck rise sooneror later

,as l ittle stock is to be met with

on the way up . I f he neglected to watchthe market continuously and get in atthe very sta rt

,his chances wou ld be

greatly lessened . He might not have thecourage to take on the larger quantity .

On Friday, March 2 6 , 1909, Readingand Union were about as dul l as twogentlemanly leaders could wel l be . Reading opened at 1 32 54 ,

high was 1 33M, low1 32 4 ,

last I 32M1, Union’s extreme fluc

tuation was M— from 180M; to 18 1M;Activity was confined to such pups”

Beet Sugar,Mexican Central and Kan

sas C ity Southern .

The fol lowing day, Saturday, theopening gave every indication that the

—1 1 4

Dul l Markets and Their Opportunities

previous day’s du lness wou ld be repeated

,initial sales showing only fractional

changes . Copper, B . O ., Wabash pfd .

and MOP were up M orM. Union wasM higher and Reading M lower. BeetSugar was down Mg, with sales at 32 .

Reading showed 1 100 1 3212 800

Union 800 .g

1 8 1 400 1 8 1 2 00 V3400 1 8 1 . A single hundred Stee l at

B . O . ReadingBeet Sugar 400

“

M3.Union 800 Steel 1 000 45 .

Beet 800 3 2 . Stee l 1 500 45 . Reading Steel Market dead .

Mostly 100-share lots :Reading 1 600 Stee l 400 45 .

Beet Sugar looks good on the bul l s ide ,300 3 2M 700 Union 2 00Reading 500 1 3 2 3 8 . Union 300 1 801

’M.

A . M . merican Sugar nowresponds s l ight ly to the strength inB eet Sugar

,but we shou ld rather not

see the cart before the horse . Sugar2 00 1 3o% 600 1 3 1 . Beet 3 2M 600

Th is stock holds the spot-l ight .Others inan imate .

Ah " Here ’s our cue " Reading 2 300

1 3 2M acoc M 500 Comingout of a dead market

,quantities l ike

these taken at the offered pri ces canmean on ly one th ing, and withoutqu ibb l ing the Tape Reader takes on abunch of Reading “at the market .”W hatever i s doing in Reading, therest o f the market is s low to respond ,a l though N . Y . Central seems wi l l ing

—1 1 5

The Cue

Getting Into

Active Stocks

Tape Read ingto he lp a l i tt le— 500 I 2 7M (after M) .

Beets are up to 33M. Stee l is 4556 ,and Copper 7 1M—a fraction better.Reading 300 1 3 2

12 . Stee l 1 300

45M M . Union 1 8 1 . Reading 300Beets 33M. Union 700 18 1M.

N . Y . Centra l 600 5MThere ’s some ass istance "Union 900 1 8 1 1 3 . Reading

Copper 700 7 112 . Reading 800 1 32%

1 33 g oo 1 33 1 100 M . Central 300Union 400 1 8 1 1 3 300 M.

Reading 1 500 1 33M 3500 M .Notmuch doubt about the trend now . Thewho le market is responding to Reading

,and there is a steady increase in

power, breadth and vo lume . The rapid advances show that short coveringis no smal l factor . Union 400 m y.

I t looks as though a lot o f peop le arethrowing their Beet Sugar and getting into the big stocks . St . Paul , Copper and American Sme lters begin to l i fta l itt le .Around 1 1 A . M . there is a brie fperiod of hes itat ion

,in wh ich the mar

ket seems to take a long breath inpreparat ion for another effort . Thereis scarce ly any react ion and no weakness . Reading backs up a fraction to1 33 M and Union to There areno se l l ing indications , so the TapeReader stands by his guns .

'Now they are p icking up aga inReading 1 33% M 1M. Union

1 1 6

https://www.forgottenbooks.com/join

Tape Readinged to s tart a th ing ro l l ing than to keep1t going.

Some of my readers may th ink I amgiving i l lustrations after these th ingshappen on the tape , and that what aTape Reader wou ld have done at thetime is prob lemat ica l . I therefore wishto state that my tape i l lustrat ions aretaken from the indicat ions which ac

tua l ly showed themse lves when theywere fresh ly printed on the tape

,at

wh ich time I did not know what was

g oing to happen .

There are other ways in wh ich atrader may emp loy himse l f during du l lperiods . One is to keep tab on thepoints of res istance in the leaders andp l ay on them for fractional profits .This , we admit, is a rather precariousoccupat ion , as the operat ing expensesconst itute an extreme ly heavy percentage aga inst the p layer, esp ecial ly whenthe leading stocks on ly swing a pointor so per day .

But if one chooses to take thesechances rather than be id le, the bestway is to keep a chart on which shou ldbe recorded every Mfluctuat ion . Thisforms a picture o f what is occurringand c lear ly defines the points of res istance

,a s we l l as the momentary trend .

In the fol lowing chart the stock opensat 18 IM and the first point o f resistance is I S 1M. The first indicat ion of

a downward trend is shown in the dipto 18 1M,

and with these two straws-1 1 8

Dul l Mark ets and Their Opportunities

showing the tendency, the Tape Reader goes short “

at the market ,” getting,say, 18 1M (we

’ l l give ourselves theworst of i t)Af ter making one more unsuccessfu lattempt to break through the res istance at 18 1M,

the trend turns tinm is

Chart show ing points of resistance in a du l l market

takab ly downward, as shown by an a l

most unbroken series of lower tops andbottoms

.These ind icate that the

pressure is heavy enough to force theprice to new low level s, and at thesame time it i s sufficient to preven tthe ral ly going quite as high as on theprevious bu lge .

At 180M a dew point of res i stanceappears

.The decl ine is checked . The

—1 19

Tape Reading

Tap e Reader must cover and go long .

The steps are now upward and as theprice approaches the former point ofres i stance he watches i t narrow ly forhis ind ication to c lose out . Thi s t ime

,

however, there is but s l ight opposit ionto the advance

,and the price breaks

through . He keeps h is long stock .

In making the in i tial trade he p laceda doub le” stop a t 18 1M, or M , on theground that if h is stock overcame theres istance at 18 1M i t wou ld go higherand he wou ld have to go with it . B e

ing short 100 shares, h is doub le stoporder wou ld read : “Buy 200 a t 18 1Mstop .

”Of course the price might j ust

catch h i s stop and go lower'

. Theseth ings wi l l happen , and anyone whocannot face them without becomingperturbed had better learn se l f contro l .After going long around the lowpoint

,he shou ld p lace ‘ another doub le

stop at 180 or I 79M, for if the point ofres istance i s broken through after hehas covered and gone long, he mustswitch h is position in an instant . Notto do so would p lace h im in the attitude o f a guesser . I f he i s p l aying on

th is p l an he must not di lute i t withother ideas .Remember th is method is on ly ap

pl i cable to a very du l l market , and, aswe have sa id

,is precarious business .

W e cannot recommend it . I t wil l nota s a ru le pay the Tape Reader to at

tempt sca lp ing fractions out of the—1 20

https://www.forgottenbooks.com/join

Tape Reading

he cou ld have dumped . i t a t the topj ust before the close, or he ld it t i l lnext day, when it touched 33M.

12 M.

11 A. M.

—1 22

.Aknunfieanl l3eet 53u gar

2934 100100600

2996 5002956 5002996 1002954 1002936 1003030363034

303430953096 2003096 [00

5003096 2003096 10003096 7003054 600

6003055 3003096 200

100400

3055 400100

3055 2003095 2003035 300

200

W 3883094

300

30§é30¥é 100aosg 700

-Du l l Markets and Their Opportunities31 35 30032 40032% 80032 56 10003254 200

On March 5 , 1909, Kansas C itySouthern spent the morn ing drift ingbetween 42M and 43M. Short ly afterthe noon hour the stock burst into ac

tiv ity‘

and l arge vo lume . Does anysane person suppose that a hundredor more peop le became convin ced thatKansas C i ty Southern w as a purchaseat that part icu l ar moment ? Whatprobab ly started the rise w as the p l acing of manipu lat ive orders , in whichpurchases predominated . Thus the

.

sudden act ivity,the vo lume and the

advancing tendency gave notice to theTape Reader to get aboard .

” Themanipu l ator showed his hand and theTape Reader had on ly to g o alongwith the current .

Kansas City So u thern

43% 1004355 20043 56 40043 356 3004356 10043

4322 11 A. M.

4354, 200431g 10043 60043 56 25

4354 100

,

gssg 1004354 100

—12 3

“Get Ab oard

2 P . M.

445644 5644564456

4456

445645

445645

45 5645 5445 5645 5445 5645 5445 5645 56

1 P . M. 45 56

45 36

45 5646

465646 564656465646 564656

4652,

Pyramiding The advance'

w as not on ly susta ined,

but emphas ized at certa in points . Herethe Tape Reader cou ld have pyramidcd , using a stop close beh ind h is average cost and ra i s ing it so as to con

—1 2 4

12 M.

Tape Reading435643 54 50043 56 180043 54 3004356

https://www.forgottenbooks.com/join

Fig ure Charts

V III . The U se of Charts as Gu ides

and Indicator s

ANY interesting queries havebeen received by TH E TICKERrelating to the use o f charts .The fol lowing is a representa

tive communication :“Referring to your figure chart expla ined in Volume 1 , I have foundit a most valuab le a id to detectingaccumu lat ion or distribution inmarket movements . I have beenin W al l Street a number of years ,and l ike many others have a lwaysshown a skepti cal att i tude towardchart s and other mechanical method s of forecasting trends ; but aftera thorough tria l o f the chart on

Union Pacific,I find that I cou ld

have made a very cons iderab le sumi f I had fo l lowed the indicat ionsshown . I n c . e your suggestions tooperators to

,study

“ earn ings, e tc . ,

a nd not to re ly on charts , a s theyare very often l ike ly to mis lead . I

“regret that I cannot agree withyou . You have often stated thatthe tape te l l s the story ; s ince th isis true

,and a chart is but a copy

o f the tape , with indicat ions of ac

—126

The’

Use of Ch arts as Guides . and Indicato rs

cumulat ion or distribution , a s thecase may be

,why not fol low the

chart entirely,and el im inate a l l un

necessary time dev oted to study of

earn ings,etc . I’”

Let u s cons ider those port ions o f

the above which relate to Tape Reading

,first clear ly defining the difference

between chart operat ions and tapereading .

The genu ine c hart p l ayer usual lyoperates in one stock at a t ime , us inga s a bas is the pas t movements of thatstock and fo l lowing a more o r lessdefinite cod e o f rules . He treats themarket and h is stock as a mach ine . Heuses no j udgment as to market cond itions , and does not cons ider themovements of other stocks ; but he exerc ises great discretion as to whetherhe shal l “p l ay” an indicat ion o r not .The Tape Reader operates on whatthe tape shows now . He is not weddedto any particu lar issue

,and

,if he

chooses,can work without pencil , pa

per or memoranda o f any sort . Hea lso has his code o f rules—less clearlydefined than those o f the chart player .So many diff erent situations presentthemselves that his rules gradual ly become intu it ive—a sort o f second nature is evo lved by self-tra in ing and experience.

A friend to whom I have given somepoints in Tape Reading once asked ifI had my ru les al l down so fine that

—1 2 7

Tape ReadingI knew j ust wh ich to u se at certa inmoments . I answered him thus :When you cross a street where thetraffi c i s heavy, do you stop to consu lta set o f ru les showing when to runahead o f a tro l ley car or when not tododge a wagon ? No . You take alook both ways and a t the proper mo~

ment you wa l k across . Your mind maybe on someth ing e lse or you may bereading your newspaper whi le crossing—your j udgment te l ls you when tostart and how fas t to wa lk . That isthe att i tude of the tra ined Tape Reader .The diff erence between the ChartP layer and the Tape Reader is therefore about as wide as between day andn ight . We ' do not see how the chartfol lower cou ld mix Tape Reading withh is art without making a hodgep odgeo f i t . But there are ways in whichthe Tape Reader may uti l ize charts asgu ides and indicators and for the purpose of re inforcing h is memory .

Detecting First,as our correspondent says , the

fincfumu lation Figu re Chart ( see TICKER, Vol . 1

,No .

Distribution 4) i s unquestionably the best mechanica l means of detecting accumulationand distribution . I t is a l so valuable 1n

show ing the ma in points of res istanceon the big swing s .A figure chart cannot be made fromthe open

,high , low and last prices ,

such as are printed in the averagenewspaper. We recal l but three pub

—1 2 8

https://www.forgottenbooks.com/join

Inte tetinghart

Tape Readin gal ly form the axis and long rows ofthese figures seem to indrcate

plenty o f stock is for sale at th is leve l .In case we are not sure as to whetherth i s is further accumu lat ion or d istrib ~

ution we wa i t unt i l the price showss igns of break ing out of this narrowrange. After the second run up to 5 1the gradua l ly lowering tops warn us

that pressure is resumed . We therefore look for lower prices .The downward steps continue ti l l 35i s touched , where a 36-7 l ine begins toform . There i s a dip to 3356 , whichgives us the fu l l figure 34 , after wh ichthe bottoms are h igher and l ines com~

mence forming at 38 9 . Here ” are al lthe earmarks of manipu lat ive d epress ion and accumu lat ion—the stock is

not al lowed to ral ly over 39 until l iquidat ion is comp lete . Then the gradu ~

al ly ra i sed bo ttoms notify us i n ad

vance that the stoc k is abo ut to pushthrough to higher leve ls .Now i f the Figure Chart were an

infal l ib le gu ide no one wou ld have tolearn anything more than its correctinterpretat ion in order to make b igmoney . Our correspondent says ,

“af

ter a thorough trial of the chart on U.

P . I find that I cou ld have made a verycons iderable Sum i f I had fo l lowed theindicat ions shown .

” But he would nothave fol lowed the ind i cation s shown.

H e is foo l ing h imse lf. It is easy to

look over the chart afte rwards and see

Th e Use of Charts as Guides and Indicators

where he cou ld have made correctp lays, but I venture to say he nevertested the p lan under proper condif

t ions .

Let an one who th inks he can makemoney fi l low ing a Figure Chart orany other k ind o f a chart have a friendprepare it, keeping secret the name ofthe stock and the period covered . Thenput down on paper a pos it ive set o f

ru les which are to be strict ly adheredto , so that there can be no g uesswork .

Each s ituation w il l then cal l for a certa in pl ay and no deviation is to bea l lowed . Cover up with a sheet ofpaper al l but the beginni ng o f thechart

,gradual ly s l id ing the paper to

the right as you prog ress . Recordeach order and executlon j ust as i factually trading. Put Rol lo Tape downas coppering every trade and whendone send h im a check for what youhave lost .I have yet to

,meet

,the -man who

has mad e money trading on a FigureChart over an extended period .

Any kind o f a chart w i l l show someprofits at t imes, but the test is : Howmuch moneyw

i l l i t make during sev

eral months ope rat ions ?

The Figure Chart can be used inother ways . Some peop le constructfigure charts showing each fractiona lchange instead of the fu l l points . I Theidea may a l so be used in connectionw ith the Dow, Jones Co . average

” 1 31

Tape Reading

prices . But for the practica l TapeReader the ful l figure cha

’

rt fi rst described is about the only one

‘w e can :

recommend .

Its va l ue to the Tape Reader l ieschiefly in its indicat ions of accumulat ion and distribution . These frequently (not a lways ) warn the Operator inadvance o f an important mo ’ve ‘ and puthim on the watch fo r the moment wheneither process i s compl eted and themarking up o r down b egins ;The chart gives the direction o f coming moves ; the tape says “when .

”

Some peopl e cla im to be able to pred ict how far such a movement wi l l goby counting the number of ful l fi g u reswhich form an unbroken l ine . In acase where a stock shows a long horizonta l l ine o f 195 and 205 at the bottom of a decl ine , and a count o f the

‘

zos

shows that there are twelve of them,

this is taken as an indicat ion that therewi l l be a rise o f twelve points from 20.

Figure charts seem to bear th i s out insome instances

,but l ike the majority

o f chart ind ications , there are verymany exceptions to the ru l e . Thereappears some l ittl e foundat ion for thesuppos ition

,however

,as it i s logica l

to suppose that the more importantthe contemplated move , the more stockwil l the ins iders wish to buy and thelonger t ime wil l be required in : whichto accumulate it .The ordinary s 1ng le l ine chart which

—1az

https://www.forgottenbooks.com/join

A Compo siteChart

Tape Reading

If one wishes a mechanical trend ind icator as a supplement and a guideto h is Tape Reading, he had best keepa chart composed of the average da i lyhigh and low of eight or ten leadingstocks . For conven ience in figuringthis average it is wel l to take tenstocks

,say Union

,R eading

,St . Pau l,

Pennsy lvan ia , N . Y . Central and Erieamong the ra i l roads

,and Amalgama

ted,Smelters , Stee l and Car Foundry

among the industrials . First find theaverage high and average low for theday and make a chart showing whichwas touched first . This wi l l be founda more rel iab le guide than the Dow,

Jones averages , wh ich only cons iderthe c los ing bid o f each day , and which ,as strongly i l lu strated in the ‘May,1901 , panic , frequently do not fa irlyrepresent the day ’s actua l fluctuations .Such a composite chart i s of no va l

ue to the Tape Reader who sca lps andcloses out everything da i ly . But itshould benefit those who read the tapefor the purpose of catch ing the im

portant five or ten point moves . Sucha trader will make no commitments notin accordance with the trend , as shownby this chart . His reason is that evena well planned bull campaign in astock wil l not usual ly be pushed tocompletion in the face of a down trendin the general market . Therefore hewa i ts unti l the trend conforms to hisind icat ion .

-1 3 4

The Use o f Charts as Guides and Ind icators

It seems hardly necessary to say thatan up trend in any chart is indicatedby consecutive h igher tops and bottoms

,l ike sta irs going up, and the re

verse by repeated steps toward a lower level . A series of tops o r bottomsat the same leve l shows res is tance . Aprotracted z ig-zag within a short radius accompanied by very sma l l volumemeans l ife lessness

,but with normal or

abnorma l ly large volume , accumulation or dis tribution is more or l ess evideuced .

There is a sty le o f chart which was

originated by “The Ana lyst ,” it being

especia l ly adapted to the study o f volumes . The following rough sketchwil l give an idea of it

Volum e Chart

When made to cover a day’s move

ments in a stock,th is chart is particu

larly va luable in showing the quantityof stock absorbed at various levels .

The VolumiChart

Dividends

Tape ReadingComparisons are readi ly made by adding the quantit ies horizontal ly . Manyother suggest ions wi l l be derived fromthe study o f th is chart .An important p oint i n -connectionwith the making of charts is the treatment of a stock which sel ls ex-dividend . Many peop le cons ider a dividend as equa l to a corresponding decl ine in market price ; i n fact , the mostprominent pub l i sher Of charts fo l lowsthis method . We do not agree . Inour Opin ion when a stock se l l s ex-divi( lend the sca l e should be changed so

that the stock wil l show the same relative pos it ion as before the d ividend .

For instance , i f a stock is 138 before adividend amounting to 2 per cent andse l ls at 136 ex-dividend, the 138 l inebecomes the 136 l i ne , etc .There is another form of chart which

is som et imes va l uab le in detecting thebeginning and - end o f a manipulativecampa ign . I t is based principa l ly onvo lumes and affords a ready indicatorof any unusual activity in a stock . Thescale is set at the side to represent thevo lume and the verti ca l l i nes aredrawn to show the number of shares“

for the day . A plus or minus sign atthe top o f each vertica l l ine may be usedto indicate a net‘

advance or decl ine forthe day . Some people add to this an obl ique line to show the range ‘

for the day.

The profic1ent Tape Reader. wi l ldoubtless prefer to discard al l me

-136

https://www.forgottenbooks.com/join

Tape Reading

chart ing one or two stocks is l ike re ;

cording the act ions of one ind ividualas exempl i fying the actions o f a

large fami ly .

IX . Daily Tr ades v s . Long pull

Operations

UST now I took a sma l l triang ular p iece o f blotting paperthree-eighths of an inch at itswidest, and stuck i t on the end

of a pin . I then threw a blot o f ink ona paper and put the blotter into contact .The ink fai rly j umped up into the blotter, leaving the paper comparatively dry.

This is exact ly how the market‘

acts

on the tape when its absorptive powers are greater than the supply—largequantities are taken at the Offeredprices and at the h igher levels . Pricesleap forward . The demand seems insatiable .After two or three blots had thus

been absorbed,the botter wou ld take no

more . It was thoroughly saturated . Itsdemands were satisfied . Just in thisway the market comes to a standstil l atthe top o f a rise and hangs there . Supply and demand are equal ized at the newprice level .Then I fil led my pen with ink, andlet the fluid run o ff the point and ontothe blotter . (This i l lustrated the distribution of stocks in the market.) Be.

-139

Ab so rption

W atch fu lness

Tape Read ing

yond a certain point the blotter wouldtake no more . A drop formed and fe l lto the paper . (Supp ly exceeded demand . ) The more I put on the blotter the fa ster fe l l the drops . (L iquidati011 —market seeking a lower leve l .)Th is is a s imp le way o f fixing m ourmind s the principal oppos ing forcestha t are constantly operat ing in themarket—absorpt ion and distribut ion ,

demand and supp ly, support and pressure . The more adept a Tape Readerbecomes in weighing and measuringthese e lements , the more successfu l hew i l l be .But he must remember tha t even hi smost accurate readings wi l l often benu l l ified by events which are transp iring every moment of the day . H iS

‘

stock may start upward with a rushapparently there is power enough tocarry it several points ; but a fter advancing a couple o f points i t may run upaga inst a larger quantity o f stock thancan be ob sorbed , or some unforeseenincident may change the whole c om

plexion o f the market . The Tape Readermust be quick to detect such changes

,

switch his position and go with this newly formed trend .

To show how an operator may becaught twice on the wrong side in oneday and stil l come out ahead

,let us

look at the tape o f DecemberUnion Pacific opened below the pre

vious night’s close : 500 .

—t4o

https://www.forgottenbooks.com/join

Tape Readingl iquidation has sta rted . SO he

SELLS 200 UNION PACIFIC AT 176 .

That is he dumps over h is long andgoes short at 176 .

The weakness continues and the re isno sign of a rally unti l a fter the stockhas struck 174/2 This being a break o f6M points

.

since yesterday,the Tape

Reader is now wide awake for signs o fa turn, real iz ing that every additionalfraction brings h im nearer to that po int,wherever it may be .A fter touch ing 174M the trend of

the market changes comp lete ly . Lar

ger lots are in demand at the off eredprices . There is a final drive but veryl itt le stock comes out on i t . Duringth i s drive he

BUYS Ioo UNIONPACIFIC AT 174M,

and as s ign s of a ral ly mu l tip ly heBUYS I oo UNION PACIFIC AT I 75M.

From that moment it is easy sail ing .

There is amp le opportun ity for himto un load his las t purchase j ust beforethe c lose when he

SE LLS 100 UNIONPACIFIC ATB ou g h t . S ol d . P rofi t1 7 8 56 1 7 8 541 7 6 56 1 7 8 541 7 6 56 1 7 6

1 7 4 56 1 7 6

1 7 5 54 1 7 6 56C ommissions and taxes 13 5 00

Net profit for the d ay

Daily Trades vs , Long Pul l Operations

This is doing very we l l cons ideringhe was caught twice on the wrongside and in his w ig g l ing s pa id $ 135 incomm is s ions and taxes.

Success in trading be ing chiefly aque st ion o f reducing and e l iminatinglo s ses, commiss io ns, interest and rev

enue stamps,let u s see whether he

might have used better jud gment . Hisfirst trade seems to have been made onwhat appeared to be ins ide buying.NOtrend h ad deve loped . He saw rou ndlots being taken at 17854 and over andreasoned that a ral ly shou ld natura l lyfo ll ow pronounced support . His mistake was in not wa i t ing for a c learlydefined trend . I f the buying was

strong enough to absorb al l off eringsand turn the market

,he wou ld have

don e better to have wa i ted t i l l th is was

certa in . When a stock ho lds s teadywith in a half point radius i t does nots ign ify a reversal o f trend, but rathera

’

ha lting p lace from wh ich a new

move in either direct ion may begin .

Had he,

fo l lowed the first sharpmove, h i s original trade wou ld havebeen on the short—not the long s ide .Thi s wou ld have saved h im h is firstloss w i th its

“

attendant expenses , ag

g re ating and wou ld have nearly oub led the day ’s profits .His second loss was made on a trade

wh ich invo lved one Of the finest pointsin the art -o f Tape Reading, viz ., thatof dist ingu ish ing a ral ly from a change

Wa iting for

the Trend

Disting uish inga Mere Ra l ly

Tape Readingi n trend . A good way to d o th i s successfu l ly is to figure where a s tock isdue to come after i t makes an

.u ,pturnal lowing that a normal ral ly i s fromone-half to two th irds of the dec l ine ."That is , when a stock dec l ines twoand a half ' points we can nlook . for a tleast a point and .a quarter ra l ly un

l ess the pressure is s ti l l on . In casethe dec l ine is not over

,the ral ly wi l l

fa l l short .What d id Union do after it touched

I 76M? I t sold at 17656 . M 177M.

Hav ing dec l ined from f 179M to 176M,

2M po ints , i t was due to ral ly at least1M points , or to 177M. Its fa i l ing tomake thi s figure indicated that thedec l ine was not over and that h i s shortpos ition shou ld be ma inta ined .

Furthermore , that las t jump of halfa point between sales showed an un

healthy condi t ion o f the market . Fora few moments there wa s

,evident ly a

cessat ion of se l l ing, then somebodyreached for a . hundred shares Offeredat 177M. As the next sal e was I 76Mthe ho l lowness of the rise became apparent.Whi le th is ral ly lasted, the lots were

smal l . This of itse lf was reason fornot covering . Had a genuine demandsprung from either longs o r shorts asteady ri se, on increas ing vo lumes ,wou ld have taken p lace . The absenceo f such indicat ions seems to u s nowa reason for not covering and goinglong at 176M.

https://www.forgottenbooks.com/join

Tape Reading

away from the tape or who is trad ingwith an arbitrary stop . The TapeReader wi l l seldom take over half a

point to a point loss for the reason thatas w il l genera l ly buy or se l l at

,or

c lose to , the p ivotal point or the l ineo i - res istance . Therefore , shou ld thetrend o f his stock suddenly reverse, heis w ith i t in a moment . The los sesin the above mentioned Un ion Pacifictransact ions (M and M respect ive ly)are perhap s a fa i r average

,but fre

quent ly he wi l l be ab le to trade witha r isk of on ly M , M or M .

The fact that th i s poss ib le los s isconfined to a fraction shou ld not leadh im to trade too frequent ly . I t is better to look on part of the t ime ; to ‘restthe mind and al low the j udgment toc lari fy . Du l l days wi l l often constra inone for a t ime .and are therefore benefic ial .

The b ig money in Tape Reading ismade during very active markets . B igswings and large vo lumes produce unmistakab le indicat ions and a harv estfo r the experienced op erator . He we lcomes twenty, th irty and fifty-po intmoves in stocks like Reading, Uniono r Conso l idated Gas—e pOWerfu l p laysby financial giants .And this fact remind s us of one o f

the things we have heretofore intended to reason out : Is it better toclose trades each day, or ho ld throughreact ions , and i f necessary, for several

Dai ly Trades vs . Long Pu l l Operations

days or weeks in order tO ’

secure a

l arge profit?The answer to th is quest ion depends

M some‘wmt upon the temperament of

0

the Tape Reader . If his make-up is D‘fi ef‘ncé

such that he can c lose ly fo l low thesmal l swings with profit, gradual ly b ecoming more expert and steadi ly in s

creas ing h is commitments,he wi l l

short ly “arrive” by that route. I f h isdispos ition is such that he cannot tradei n and out actively, but is content towa it for b ig opportun it ies and patientenough to hold on for l arge profits, hewi l l a lso “get there .” I t 15 imposs ibleto say which style of trading wou ldproduce the best average resu l ts , because it depends altogether upon indiv idual qual ificat ions .Looking at the quest ion b road ly, we

shou ld say that the Tape Reader whounderstood the l ines thus far sug est

cd in th is series, might find i t othdiffi cu lt and less profitab le to operateso le ly for the long swings . In the

fi rst p lace , he wou ld be ob l iged to lettwenty or th irty opportun ities pass byto every one that he wou ld accept . Thesmall swings o f one to three pointsgreatly outnumber the five and " tenpoint movements, and there wou ld bea cons iderab le percentage of los ingtrades no matter how he operated .

It wou ld seem also tha t close contact with the -tickeR would not g ivethe correct perspective for long pull

- 14?

Swing s

Tape Readingoperat ions . Many of the indicat ions

,

such a s the extent o f reactions,l ines

o f res is tance, etc ., wi l l be found equally operat ive in the broader Sw ings ,j u st as an en l argement of a photograph reta in s the l ines of its Origina l .Tape Reading seems essential ly a profess ion _for the man who is mental lyact ive and flexibl e, capab le of makingqu ick and accurate decis ions and keenly

o sensitive to the most minute ind ications . On the other hand

,trading

for the larger swings requires one toignore -the minor prognostics , and to

‘

put some stress upon the influentialnews o f the day, and its effect uponsentiment ; he must stand ready . totake l arger losses and in many wayshandle h imse l f in a manner altogetherd iff erent from that of the smal l swingtrader .The more close ly we look at the prop

osition, the more the two methods of

operat ing seem to disun ite, the broad

swing p lan appearing best adapted tothose who are not in continuous touchwith the ticker and who thereforehave the advantage of distance andpersp ect ive .

In,a subsequent series we hope to take

up this subject in detail, in an efiort toshow how the business and the professional

‘

man who cannot attend his bro

ker'

s ofiiee, may profitably apply intel li

g ent foresig ht to the stock market underthe shade of his evening lamp.

-1 48

https://www.forgottenbooks.com/join

Tape Readingshou ld form no smal l part of the TapeReader ’s income . But he must separate such trades from h is regu lar da i lytrading ; to al low them to confl ictwou ld destroy the eff ectiveness ofboth . I f he finds the long pu l l tradeinterfering with the accuracy of h isjudgment, he shou ld close it out at

once . H e must p lay on one s ide o f

the fence if he cannot operate on both .

One can readi ly foresee how a trader w ith one hundred shares of Stee la t 43 for the long pu l l , and two hundred for the day, would be temptedto close out a l l three hundred on in

d ications o f a dec l ine . This is wherehe can test h i s abi l i ty to act in a dualcapacity . He must ask h imse lf : HaveI good reason for th inking Stee l wi l lse l l down five points before up five ?Is th i s a sma l l reacti on or a big shakedown ? Are we sti l l in a bu l l swing?Has the stock had its normal ra l lyfrom the last dec l ine ? These andmany other quest ions wi l l enable himto decide whether he shou ld hold thishundred shares or clean house .I t takes an exceptiona ly strong wi l land c lear head to act in th i s way without interfering with one ’s regu lar trao

ding. Anyone can se l l two hundredand ho ld one hundred ; but wi l l h isj udgment be b iased because he is s im

u ltaneou sly long and short—bul l ishand bearish ? There

’s the rub "The real Tape Reader is apt to pree

Dai ly Trades vs . Long -Pul l Operations

fer a clean slate ' at 3 P. M . every day,so that he can s it down to his t ickerat the next morn ing’s opening and say,

“I have no commitments and no Op inion . I W i l l fo l low the first strong ind 1cat10n He wou ld rather average$100 a day for ten days than make

on one trade in the same” lengtho f time . The risk is general ly l imitedto a fract ion and having arrived at apoint where he is showing even sma l laverage da i ly profits , h is requ ired capital per 100 shares need not be over

to

Suppose for sixty days on 100

share operations h is average profitsover losses were on ly a quarter of apoint a day . At the end of thatt ime h is capital wou ld have been increased by $ I ,SOO, enab l ing him totrade in 200 share lots . Another th irty days with s imi l ar resu l ts and hecould trade in 300-share lots, and so

on . I do not mention these figures forany other purpose than to aga in emphas ize that the obj ect ive point inTape Reading is not large individualprofits , but a continuous chipping inof smal l average net profits p er day .

' Ab0ut two months ag o , I am to ld , aman from the West came into theoffice of TH E TICKER, and sa id that hehad been impressed by th is series onTape Reading, and had come to NewYork for the so le purpose of tryingh is hand at it . He had $ 1 ,000 which

An Incident

Tape Rea'

d ing

he was wi l l ing to lose in demonstrat ing whether he was fitted for thework .

He was advised not to trade in overten-share lots, and was especiallywarned aga i nst operat ing a t a l l unti la fter he had actua l ly studied the tapefor two or three months .Recently, I am informed , he cal led

aga in and re l ated some of his experi

ences . I t seems that he cou ld not ah

sta in from trading,but started with

in two o r three days after he decidedon a brokerage house . He stated thatduring the tw o months he had madeforty-two trades o f ten shares each and

had never had on hand over twentyfu l l Shares a t any one time . He admitted that he had frequent ly mixedguesswork and tip s with h is TapeReading

,but as a ru le he had fo l lowed

the tape .H is losses were se ldom over a pointand h is greatest loss was one and ahalf points . His maximum profit w as

three points . He had at times tradedin other stocks bes ide the leaders . Insp ite of h i s inexperience , and his at

tempt to mix tip s and guesses withshrewd j udgment

,he was actual ly

ahead of the game, after paying out

about $ 1 2 5 in commiss ions , etc .This was especial ly surpr1s 1ng 1n

view o f the trader ’s mark et throughwhich he

,

had passed . Whi le theamount of h is net profit was smal l ,

—1 5 2

https://www.forgottenbooks.com/join

X . V ar ious E xamples and Su ggestions

E CENT trading observationsand experiments have conv inced me that i t is impracticable and almost imposs ib le to

gauge the extent of a movement byits in it ial fluctuat ions .Many important swings begin in themost mod est way . The top of an important dec l ine may present nothingmore than -

a l ight vo lume and a drifting tendency toward lower prices , subsequent ly deve loping into a heavy ,s lumpy market

,and ending in a vio

lent downward p lunge .In a previous number I suggestedthat the Tape Reader sel ect on ly thosemoves which seem to offer opportunities for wide swings . My op in ion now

is that the operator shoul d a im tocatch every important swing in theleading active stock . To do this hemust act prompt ly when a stock goesi nto a new fie ld or otherwise gives anindicat ion

,and he must be ready to

fo l low wherever i t l eads . If it hasbeen moving within a three-point radius and sudden ly takes on new l ife and

-15 4

Various E xamples and Sug g estions

act1v ity, bursting through its formerbounds , he must go with itI do not mean that he shou ld try tocatch every wriggle . If the stock risesthree points and then reverses one or

one and a ha l f points on l ight vo lume,he must look upon it ‘as a perfect lyn atural reaction and not a change oftrend . The expert operator wi l l notordinari ly let a l l of three points getaway from him . He wil l keep push inghis stop up behind unt i l the first goodreaction puts h 1m out at close to theh igh figure . This leaves him in a positiou to repurchase on the reaction ,provided no better opportunity presents itse lf. Having purchased at ‘

such

a t ime, he wi l l se l l out aga in as theprice once mo re approaches the h ighfigure, un less indicat ions point to its

forging through to a new high leve l .Every movement of the market and

of each stock passes through stagescorresponding to those in the l i fe ofan individua l , apt ly described by myo ld co l lege chum , B i l l Shakespeare , as“The Seven Ages . The Tape Readera ims to get in during Infancy and out

at Old Age .Usua l ly a movement gives s ignswhen i t begins to totter. A recentexample was given in the rise in UnionPacific abo utJune 2 1 st to 2 3d

when then -s tock rose from 18774 toaccompanied by an abnorma l

advance in the preferred . Each morn-1 5 5

Tape Reading

ing the London price for both issuescame higher and there was pers isten tbuying a l l day in the New York market . After touch ing 194% the movement complete ly fizzled o ut. Buyingpressure ceased . The preferred reacted sharp ly

,and the common came back

to Thereafter its ral l i es werefeeble

,the pressure was a l l on the

down side,and today

,June 2 6th , i t issti l l heavy atA new bul l movement may have itsbirth during great weakness or pressure . Just prior to the above t ime,Reading w as pounded down to I 47% ,

then to 147V ,and the res istance which

it offered at thi s leve l gave notice thata new swing was about to be inaug urated . These were s igns that the TapeReader had better get bu l l ish . Purchases could have been made with on lya fractional risk, and subsequent profits were chiefly on the bul l side . Two

or three days later the price touched1 5572 , then it went above 1 58 .

Importance of The more we study volumes,the

Vo lumes better we appreciate their va lue inTape Reading. It frequently occursthat a stock wi ll work within a threepoint range for days at a t ime withoutgiv ing one a chance for a respectables ized sca lp . W ithout going out ofthese boundaries

,i t s uddenly begins

coming ~ out on the tape in thousandsinstead

'

o f hundreds . This i s evidencethat a new movement has started

,but

https://www.forgottenbooks.com/join

Pub lic

Tape Reading

last t ime Reading struck 159% une,

I I counted some 5 aresw it in about hal f a point of 159—un

mistakable noti ce of a coming dec l ine.

Th is was a case where the stock wasut up before being put down, and theape Reader who interpreted the movecorrect ly and layed for a good downswing would ave made cons iderablemoney .

We frequent ly hear peop le comp la ining that

“ the pub l i c is not in th is market, as though that were a reasonwhy stocks shou ld not 0 up or themarket shou ld be avo idef The speaker i s usual ly .one o f those who const itute “the pub l ic,

” but he regards theex

dpress ion as s igni fying

“every out

s i er except myse lf.” In the j udgmentof many the market i s better o ff without the pub l i c . To be sure , brokersdo not enjoy so large a bus iness, thefluctuat ions are not so riotous , but themarket moves in an orderly way and

responds more accurate ly to prevailing conditions .

A market in wh ich the pub l i c predominates represents a sort of specu lat ive “

jag” i ndu lged in by those whose

stock market know ledge shou ld berated at Everyone recogn izes thefact that when the smoke clears away’

,

the Street is ful l of v ict ims who didn ’tknow how and cou ldn ’t wa i t to learn .

Their p lungings produce violent fluctuations , however, and in this

’

respect

Various E xamples and Sug g estions

are of advantage to the Tape Readerwho wou ld much rather see ten a

pomtthan three-po int sw ing s .To offset this

,there are some d isad

vantages . First, in a ma rket wherethere is rioting of accumu lated marg ins ,

”the tape is so far b ehind that it

is se ldom one can secure an executionat anywhere near h is price . Th is isespecial ly true when activity breaksout in a stock which has been comparative ly dul l . So many peop le w ithmoney, watch ing the tape, are attracted by these apparent opportunities,that the scramble to get in resu lts inevery one paying more than he figured ;thus the Tape Reader finds it imposs ib le to know where he is at unt i l hegets h is report. His tape prices are

five minutes stale and his broker i s sobusy i t takes four or five minutes foran execution instead of one or twominutes .In the next p lace , stop orders are

often fi l led at from smal l fractions topoints away from h is stop price—thereis no te l l ing what figure he w i l l g et,while in ordinary markets he can p l aceh is stops with in y, of a res istance po intand frequently have . the price comew i th in of his stop w ithout catchingit.

So it is a question whether, al l th ing scons idered , 3 he presence o f the publ icis a he lp or a detriment to successfulTape Reading.

Orders

S top Orders

Tape Read ingSpeaking o f stop orders : The waysin which one may manipulate h is stopsfor protection and advantage , becomemo re numerous as experience i s ac

qui red . Remembering that the TapeReader. is operating for a fractionalaverage profi t per trade

,o r per day,

he cannot afford to let a point profitrun into . a loss

,or fa i l to “p lug a lar

ger profit at a point where at leas t aportion o f i t wi l l be preserved .

One of my recent day ’s trading wi l li l lustrate th is idea . I had j ust closedout a coup le of trades

,i n which there

had been losses total ing s l ightly overa point . Both were on the long s ide .The market began to show s igns of abreak

,and s ingl ing out Reading as the

most vu lnerab le , I got short of it, at15094 . In a few moments _it sold below1 50. My stop was moved down so

there cou ldn ’t be a loss , and soop as l ight ral ly and another break gaveme a new stop which insured a profit,come what m ight . A th ird drivestarted , and I pushed the

.stop down towith in of the tape price at the time,as it was late 1n the day and I cons idered this the final plunge . By the t imemy order reached the floor the pricewas we l l away from this latest stopand when the se l l ing became most violent I tol d my b roker to cover “at themarket . The p rice pa id was within

o f the bottomfor the day, and netted 2 543 after commiss io ns were pa id .

https://www.forgottenbooks.com/join

S ca lping on

B oth S ides

Tape Reading

further profit ; (2 ) The normal ral lyto 52 wil l catch h is stop and enablehim to put the stock out aga in at thatprice . The third contingency is thatit wi l l ra l ly to about catch hisstop and then go lower . He can scarcely mourn over the loss of a furtherprofit in such a case .I f the stock refuses to ra l ly the fu l lpoint to which it is enti tled

,that i s

,i f

it comes up to 5 1% or and sti l l actsheavy, it may be expected to breaklower

,and there usual ly is ample

time to get short aga in ‘ at a pricethat wi l l at least cover commiss

ions .There is nothing more confus ingthan to attempt sca lp ing on both s idesof the m arket at once . You may golong of a stock which is being put upo r is going up for some specia l reason ,and short of another stock which i spers istent ly weak. Both trades maypan out successfu l ly, but meantime thej udgment wi l l be interfered with andsome fool ish mistake wil l be made infour _cases out o f five . As Dickson G .

Watts sa id,Act so as to keep the

mind clear, the j udgment trustworthy .

”

The mind is not cl ear when the traderis working active ly on two oppos ings ides of the market . A bearish indicat ion is favorab le to one trade, and un

favorable to the other . He finds himsel f interpreting every deve lopment asbeing to his advantage and forgetting

—1 62

Various E xamples and Sug g estions

the important fact that he is a l so on

the oppos ite s ideI t is much b etter if you are shortof one stock and see another that looksl ike a purchase

,to wa i t unti l you have

covered your short trade (on a dip i fposs ib le) , and then take the long s ideof the other issue . The best time forboth covering and going long is on arecess ion which in such a case serves adouble purpose . The mind shou ld bemade up in advance as to which dealoff ers the best chance for profit

,so that

when the moment fo r act1on arrives there wi l l be nothing to dobut act .This is one great advantag e the

Tape Reader has over other operatorswho do not employ market science .

By a process o f el iminat ion he decideswhich side o f the market and whichstock affords the best opportunity . Heeither g ets in at the inception of amovement or wa its fo r the first reaction a fter the move has started . Hek nows j ust about where h is stock wi l lcome on the reaction and j udges bythe way it then acts whether h is firstimpress ion is confirmed or nul l ified .

After he gets in i t must come up toexpectat ions or he should abandon thetrade . I f it is a bu l l move

,the vo lume

must increase and the rest of the market off er some support or at least notOppose it . The reactions must show asma l ler vo lume than the advances

,in

—1 63

Getting in

Advantag es of

Tape Read ing

Tape Readingd icating l ight pressure, and each upward swing must be of longer dura t ionand reach a new high level, or itwil l mean that the rise has spentits force either temporari ly or fin

al ly.

Tape Reading is the on ly knownmethod o f trading which gets you inat the beginning

,keeps you posted

throughout the move,and gets you out

when it has cu lminated .

I f anything more approaching perfection in thi s regard exists wi l l someone kind ly come to the front withit ?Has anyone ever heard of a man , amethod , system , or anyth ing e lse thatthat wil l do this for you in WallStreet ?

I t has made fortunes for the comparatively few who have fo l lowed it .It is an art in which one can becomehigh ly expert and more and more success fu l as practice and experiencesandpapers his work and shows him whatto avoid .

I shou ld l ike to hear from my readers who have fol lowed this series,whether they have been operating un

der its guidance or not . I shou ld l iketo know how many have started toperfect themse lves in Tape Reading,and how many have been a ided indirectly ; what port ions and which ideashave benefited them most ; what poin tsare not c lear or sti l l uncovered . P lease

—1 64

https://www.forgottenbooks.com/join

XI . Obstacles to be Over come

Po ssible Pr ofits

ENTAL po ise is an ind ispensable factor in Tape Reading.

The mind shou ld be absolutely free to concentrate upon

the work ; there should be no fee l ing thatcerta in things are to be accomplishedwithin a given time ; no fear, anxiety orambition .

When a Tape Reader has his emotionswel l in hand

,he wi l l play as though the

game were dominoes . When anythinginter feres with this attitude it shou ld bee l iminated . I f

,for example

,there be an

unusual series o f losses , the trader hadbetter suspend operations unti l he discovers the cause .

Fol lowing are some of the obstacleswhich are l ike ly to be encountered :

1 . One may be trading too often .

Many opportunities for profit developfrom each day’s movements ; only thevery choicest should be acted upon .

There shou ld be no haste . The marketwil l be there to-morrow in case to-day’sopportunities do not meet requirements . '

2 . Anxiety to make a record , to avoidlosses

, to secure a certain profit for thea ss

Ob stacles to Be Overcome

day or period will g reatly warp the j udgment

,and lead to a low percentage o f

profits . Tape Reading is a good dea l l ikelaying eggs . I f the hen is not le ft topick up the necessary foods and retire inpeace to her nest

,she wil l not produce

properly. I f she is worried by dogs andsma l l boys

, or tries to lay seven eggs outo f material for six, the net proceeds maylook l ike an omelet .The Tape Reader ’s profits should de

velop natural ly . He shou ld buy or sel lbecause it is the thing to do—not be

cause he wants to make a profit or fearsto make a loss .3 . The market may be unsuited to

Tape Reading operations . When pricesdri ft up and down without trend , l ike aship without a rudder

,and few positive

indications develop,the percentage o f

losing trades is apt to be high . Whenthis condition continues it is wel l to holdoff until the character o f the marketchanges .4 . One ’s broker may be giving poorservice . In a game as fine as this

,every

fraction counts . Executions o f marketorders should average not over twominutes . St0p orders shou ld be reported in less time as such orders are on thefloor and at the proper post when theybecome operative . By close attention todeta ils in the handl ing of my orders

,I

have been able to reduce the averagetime of my

‘

executions to less than oneminute . The quickest report obta ined

—1 67

Service

Tape Readingthus far required but twenty-five seconds .To the best o f my knowledge this is arecord for New York Stock Exchangeexecutions of orders given from an o i

fice.

A considerable portion o f my ordersare executed in fromthirty to forty seconds, varying according to whether mybroker is near the ’phone or in a distantcrowd when the orders reach the floorand how far the definitive crowd” isfrom his ’phone .I have arranged a spec ial order sl ip

which distinguishes my orders . It reads :

ATTHE OFFEREDP C E AND

E P O RT S T ANT

https://www.forgottenbooks.com/join

Tape Readinga factor . This gives h im a chance for al ittle sel f-examination .

I f a person is in poor physical condition or his mental alertness below parfor any reason, he may be unable tostand the excit ent attending the work.

Loss o f sleep, or example, may renderone unfit to carry all the quotations inhis head

,or to plan and execute his

moves quickly and accurate ly. Whenanything o f this kind occurs which prevents the free play of al l the facultiesit is best to bring the day’s work to aclose .Some o f my readers think it futile to

a im for a fractional average profit pertrade when there are many fu ll points perday to be made by holding on throughdays and weeks and getting fu l l benefit o fthe b ig moves . Admitting that it ispossib le to make many more points attimes there 15 a risk of losses corresponding to the profits and the question is nothow much we can make

,but how much

we can make net.Tape Reading reduces profit-makingto a manu facturing bas is .To show how the nimble eighths pileup when their cumu lative power is fu l lyemployed

,I have prepared a table repre

senting the results o f 2 50 trading days,starting with a capital of $ 1 , It isassumed that the Tape Reader has reached that stage o f expertness where he canaverage one trade a day and a profit o f

per trade, and that as fast as

—1 70

Ob stacles to B e Overcome

is accumulated ‘

he adds 100 sharesto his trading unit .I can hear the expressions of those

who look over these figures : “Oh "

That looks all very wel l on paper, butwa it ti l l it comes to doing it in the market .These resu lts depend solely upon theTape Reader ’s abi l ity to make morethan he loses per day. There is no l imitto the number o f shares he can trade in ,provided he has the margin . I f he is atall proficient his margin wil l not bedepleted more than a few points beforehe makes up his losses and more . Heis not pyramiding in the ordinary senseo f the word ; he is simply doing an increasing volume o i shares as his capitalexpands . Al l progressive business menincrease commitments as fast as warranted by their capital and opportunities .

W hat a profit of 1-8 per day w ou ld amount to in250day s if profits w ere u sed as add i tional m ar g in .

sh ares a d a y

L ess tax 00Net p cpfl t

—l 7 1

TheNimb leE ig hth

Overcomingthe

“K 1tty

’

Tape ReadingAssuming that there are about threehundred Stock Exchange sessions in theyear

,the two hundred and fi fty days

figured represent five-sixths o f a yearor ten months . From ‘that time on,hav ing struck his ga it, the Tape Readercan

,without increasing his unit to over

1 200 shares , make $900 a week or $46 ,800 a yea r .One trader who for years has beentrying to sca lp the market and who cou ldnever quite overcome the “kitty

,

” reportsthat his first attempts at applying theseru les resu lted in a loss o f about $20 pertrade . This he gradually reduced to$ 1 2 ,

then to $8 , final ly succeeding inthrowing the balance over to the creditside and is now able to make a da i lyp rofit o f from $1 2 to $30 per 100 shares .This is doing very wel l indeed . I haveno doubt that his profits wi l l continue toincrease .Some people seem to hold the opinionthat as the profits desired are only Maverage per

’

trade one shou ld l imit himsel f in taking profits . Perhaps Ihave not made mysel f clear in thisrespect .

I buy and se l l when I get my indications . In going into a trade I do not

know whether it wil l show a profit or aloss , or how much . I try to trade at apoint where I can secure protection witha stop from MtoMpoint away, so thatmy

' risk . is l imited to this fraction‘

p luscommission and tax . I f the trade goes

—1 72

https://www.forgottenbooks.com/join

Tape Read ingsixth , the stock wentM, above the sel l ingprice at which my order was given . Ihave never seen nor heard o f this featbeing accompl ished be fore by anyone inWal l Street . Deta i ls fol low :

I had no open trades . Kansa s C itySouthern

,which had been intensely dul

came on the tape 2 600 at 46M. I gavea buying order and be fore it cou ld reachthe

“post the Tape sa id 4673 . and 47.

The stock rose steadi ly and a fter selling at 48§ é and coming back to 48M Igave the sell ing order . It has not touched 48% aga in up to now .

The next trade was in Reading. I

saw that it was being held in check ispite of its great strength . The sthad opened at 1 58 . After a certa in bu lgeI saw the reaction coming. When it arrived , and the stock was sel l ing at I 57M,

I gave the buying order, got mine at1 57§x§ and it has not been there since . Itimmediately rose to 1 5894 . I noted sel ling indications and gave the order whilethe stock was at that price on the tape .It did not react sufficiently to warrantmy picking it up aga in and later went to

which was M; above my sel l ingindication .

Southern Pacific suddenly loomed upas a winner and I, bought it at 135 . .It

promptly went to I 35M. The rest o f themarket began to look temporari ly overbu l led

,so I gave my order to sel l when

the stock was 135M, which proved to bethe highest for the day, making the fifth

—174

Ob stac les to B e Overcome

time out o f six orders when my stockmoved almost instantly 1n my favor .This il lustration is not prompted byegotism . It is given as an example ofthe high percentage o f accuracy possibleunder this method o f trading. I do notpretend to be able to accompl ish these resu lts except occasionally, but I am constantly striving toward being able to doso in a large percentage of my trades .I f one makes 2 §/g points one day andloses 2 points in the next two days

,he

is M ahead for the three days, or anaverage of M per day. He may havelosing and winning streaks, get d iscouraged and lose his nerve at times, but i f heis made of the right stuff he wi l l in timeovercome all obstacles and land at the desired goal .

X II. C lo sing the Tr ades—Suggestions fo r Students

HE student of Tape Reading,especial ly he who puts h is

know ledge into actual pract ice, i s constant ly evo lving

new ideas and making discoverieswhich modify o r nu l l ify h is formermethods . From each new elevat ionhe enjoys a broader view ; what wereobstac les d isappear ; h is problemsgradua l ly s impl ify .

We have previous ly defined TapeReading as the art o f determining theimmediate trend of prices . I f one cando th is success fu l ly in the maj ority ofhis trades , h is profits shou ld ro l l up .

But scenting the trend and getting inright is on ly one-ha l f o f the bus iness .Knowing when to close a trade is j us tas important

,i f not the most impor

tah t part of a comp lete transaction .

At a certa in point i n my trading, Ibecame aware that a large percentageof my losing trades resu lted from fa i lu re to close at the culminat ion of whatI have termed the immediate trend . Anexamp le wil l make th is c lear : New

-1 76

https://www.forgottenbooks.com/join

Tak ing QuickProfits

zCh ange s inLeadersh ip

Tape Reading

the react ion had run its course, p ickedit _up aga in , provided indications weresti l l bul l i sh . I f they were not I w ou ldhave been in the pos it ion of lookingto get short instead o f wa i ting for achance to get out of my long.

Having rese rved in the early parto f th is series the right to revise myviews

,I wi l l here record the cla im

that the best resu lts in Tape Readingl ie in scenting the moves which arel ike ly to occur in , say , the next halfhour

,gett ing in when they start and

out when they cu lminate . Th i s wi l l inmost ca ses cause fa ilure to get a ll o fthe moves in the one most active stockfor the day , but should resu l t i n manysmal l profits , and I be l ieve the finalresu lts wi l l exceed those real ized bys itting on one stock through reactions .Obj ections to the latter method aremany . One is , the change in leadersh ip which frequent ly occurs severalt imes during the same sess ion . It b eing the purpose o f the Tape Reader tokeep in the leading stock, he must a imto shift from one issue to another asthey come to the front .

I t is exasperat ing to see your stocklose its prominence and “turn dead”on your hands

,especial ly i f it occurs at

a point where part of the profit hasdisappeared . And there is l ittle comfort in a hal f-point profit when someother issue would have shown three

Clos ing Trades—Sug g estions for Studentst imes as much . Each day ’s s ess ionshould be made to yie ld the highestposs ible amount of revenue, j us t a s

though it were the last day on whichtrading could be done, and there seemsno better way of obta in ing these re

su lts than by the latest and most approved method mentioned above .The decks are thus kept c lear for

whatever offers ; there is no dead woodaboutThere is a very wide difference inmental att itude between the man whofeels compel led to get out of somethingand one who is long of money .andlooking for a chance to make a freshtrade .The start and finish of one of thesesma l l swings is best i l lustrated by atriangle

,.the narrow

“end representingthe commencement, and the wide endthe cu lmination . An upward movewou ld appear thus

—1 19

Keeping theDeck s Clear

These figures denote the wideningcharacter o f a move as it progressesand are intended to show how vo lume ,activity and number o f transactions expand until

,at the end

,comparatively

riotous condit ions preva i l . The principle works the same in the largerswings , witness the spectacu lar r ise inUnion Pacific with in a few sessionsmarking the end of the August

,1909,

boom .

After c los ing out a trade the tapewil l te l l on the fol lowing reactionwhether you are j ustified in taking thesame stock on aga in or whether someother is sue wi l l pay better. Frequently a stock wi l l be seen preparing for

a move two o r three sw ings ahead ofthe one in which it becomes the leader.Th is is a fine point, but with studyand practice the most compl icated ind ications clarify .

—1 so

https://www.forgottenbooks.com/join

Tape Read ingI have met those who pin the ir fa i thto some one point, such as the volumesup or down , and ca l l i t Tape Reading.

Others , unconscious ly trading on mechanica l i nd icat ions , pretend to bereading the tape . Then there is a c lassof peop le who read the tape with theirtongues

,ca l l ing o ff each transaction

,a

certa in accent on the higher or lowerquotations indicating whether they arebu l l i sh o r bearish . These and othersin their c lass are mere ly operating onthe superficial . If they would spendthe same five or s ix hours a day (whichthey now practica l ly waste) i n closestudy of the bus iness of specu lation,the resu lt i n dol lars would be moregrat i fying at the end o f the year . As

i t is , the maj ority o f them are nowlos ing money .

It is a source of satisfact ion,how

ever,that these Studies which

,I b e

l i eve,are the first practical artic les ever

written on the subj ect of Tape Reading

,have st irred the m inds o f many

peop le to the poss ib i l it i es in the l ineof scientific speculation . Evidence ofth i s is found in the numerous communications rece ived in response tomy recent invitat ion ; many o f themfrom traders s ituated in remote local it ies .In the ma i n

,the w riters

/ who are

t

now carry ing on long distance Operations for the big swings are desirous o ftesting their abi l ity as Tape Readers .

Clo sing Trades—Sug g estions fo r StudentsNo doubt those who have written represent but a sma l l percentage o f thenumber who are thus inc l ined .

To a l l such persons I would sayBefore you can make a success o f TapeReading you must acquire a broad fundamenta l know ledge of the market . Aprofess iona l s inger who was recent lycal led upon to advise a young asp irantsa id : “

One must become a ‘personality ’—that is, an intel lig ence developedby the study of many th ings bes idesmusic .” It is not enough to know afew of the underlying principles ; one

must have a deep understanding.

To be sure it is poss ib le for a person to take a number of the “tricks ofthe trade herein mentioned and tradesuccessfu l ly on these a lone . Even oneidea which forms part o f the who lesubj ect may be worked and elaboratedupon unti l it becomes a method in itsel f. There are endless poss ib i l i t ies inthi s direction , and after al l i t mattersl ittle how the money is extracted fromthe market

,so long as it is done leg iti

mate ly.

But real Tape Reading takes everything into account—every l itt le character which appears on the tape playsits part in forming one of the end lessseries of ‘‘mov ing pictures . In manyyears ’ study of the tape, I do not re

member having seen two of these pictures” which were dupl icates . One

can realize fromthis how impossible-1 83

E nd lessPo ss ib il ities

Tape Read ingi t wou ld be to formulate a s imple set

o f ru les to fit every case or even themaj ority of them , as each day

’s sess ionproduces hundreds o f s ituations

,

wh i ch , so far as memory serves,are

never repeated .

The subj ect o f Tape Reading is

therefore practical ly inexhaustible,

which makes it al l . the more interestingto the man who has acquired the “studyhab it .”Having fortified himsel f with thenecessary fundamental knowledge

,the

s tudent of Tape Reading should thorough ly digest these Studies and anyothers which may be obta inab le in future . I t is not enough to go over andover a lesson as a schoo l boy does, driv ing the facts into h is head by monotonous repet it ion ; tapes must be procured and the various ind icat ionsmatched up with what has been studied . And even after one bel i eves heunderstands , he wi l l presently learnthat

,to quote the words o f a certa in

song,

“You don ’t know how much youknow unti l you know how l ittle youknow .

”One of my teachers i n an

other l i ne of study used to make me goover a th ing three or four times afterI thoug ht I knew it, j ust to make surethat I did .

I shou ld say that i t is almost im~

poss ib le for one who has never beforetraded f rom the tape to go into a broker ’s o ffi ce, s tart right in and Operate

—1 84

https://www.forgottenbooks.com/join

Intuitive

Tape Read ing

Tape Reading

but spend the sess ion at the ti cker intheir respect ive oflices . Experiencehas taught them that they can producelarger profits by this method

,else

they would not fol low it . The maj ority o f them trade in 500-share lots and .

up and their bus iness forms an im p ortant share o f the da ily volume .

A number of so -cal led semi-profess iona ls operate on what may be termedintuitive tape reading. They haveno wel l defined code of ru les and probab ly could not exp la i n clearly j ust howthey do it, but they

“get the money”

and that i s the best proof of the pudding.

The existence of even a comparatively sma l l body of successfu l TapeReaders is evidence that money making by th i s means i s an accompl ishedfact and should encourage others .One of the greatest diffi cul ties whichthe novice has to overcome is knownby the s l angy but expres s ive term ,

“cold feet .” Too many people startand dabb le a l ittl e without going farenough to determine whether or notthey can make a go o f i t . And eventhose who get pretty wel l along in thesubj ect wi l l be scared to death at astring of losses and quit j ust whenthey shou ld dig in harder.For in addition to learning the artthey must form a sort of trading character

,which no amount of reverses can

discourage nor turn back and which-1 86

Clos ing Trades—Sug g estions for Studentsconstantly strives to e l iminate its ownweak points such as fear

,greed

, anx

iety, nervousness and the many othermenta l factors which go to make o r

unmake the profit column .

Perhaps I have pa inted a difficu ltpropos ition . If so , the greater wi l l bethe reward of those who master it . Asstated at the beginning

,Tape Reading

is hard work . There seems no goodreason for altering that op in ion .

If these Stud ies and those in the series which wi l l fol low are the means o fadding a few more names to the l ist o fsuccessful speculators

,wh ether they

are Tape Readers or not,I shal l fee l

compensated .

The E nd

-187

A Trad ingCharacter

https://www.forgottenbooks.com/join

https://www.forgottenbooks.com/join

RETURNTO the c irc ulation d esk of a nyUnive rsity of C a lifo rnia Lib ra ry

o rto theNORTHERNREG IONALLIBRARYFAC ILITYBld g . 400, Ric hmond Fie ld StationUniversity of C a lifo rniaRic hmond , CA 94804-4098

ALLBOOKS MAYBE RECALLED AFTER7 DAYS2-month loa ns may b e renewed by c a lling(5 10) 642-6 75 3I-yea r loa ns may b e rec ha rg ed by b ring ingb ooks toNRLF

0 Renewa ls and rec ha rg es may b e ma d e 4d a ys prio rto d ue d ate .

DUE AS STAMPED BELOW

S ENTONILLAPR 1 I 2000

u. c . BERKELEY

.NOV3 02001