“It’s a Bull Market!”

Jesse Livermore was only a boy when he began his trading career but one thing always stood out. In one trading club there was an older man named Mr. Partridge. A trader for years he nonetheless didn’t say much.

Once, the man was given a trading tip by his young friend Elmer. He was told that while the markets have been in a confirmed rally a correction was nonetheless in the cards and if he sold out and waited, he was told, he would be able to buy back his shares at much cheaper prices. After thanking Elmer for his advice he replied that he wasn’t going to be making any trading adjustments. “You know we’re in a bull market” Mr. Partridge answered, “I may lose my position”. Jesse, confused by the reply asked what he meant. Mr. Partridge explained that in all his trading years he’s learned that one cannot truly predict the markets. One buys low and sells high, weathering through all the spikes and corrections, since he never knows when the next leg of the rally will continue on strong.

A story was recently posted in the Daily Wealth by Tom Dyson that I think every single investor should understand, learn from and live with throughout every investment for the rest of his life.

It’s an incredible story from the Great Soybean Bull market. It involves a young trader named Michael Marcus.

During the 1970s, soybean prices rose from $3.25 and eventually hit $12. Marcus was long, and making money. But at one point during the run, Marcus impulsively took profits and sold everything. “I was trying to be fancy instead of staying with the trend,” he says.

As soon as he’d taken his position off, soybean prices jumped sharply, hit their daily limit for price movements, and shut the market down for 12 days in a row!

The experience was so agonizing for Marcus – trapped on the sidelines while all his buddies made millions – he resorted to tranquilizers and eventually quit his job. “That was the low point in my trading career,” he says.

What happened? Two lessons were learned. One, as smart and successful as you will ever become in the markets there will always be a point at which you believe you can outsmart it. If you want to speculate with some extra cash when you feel that the market is strongly oversold, that’s fine. But lesson number one is “Never liquidate everything in a bull market”.

Of course number two is simple. Patience and Time is everything. Markets start and finish in extremes. “Wait for the extreme cheap – buy big – and then wait again for the extreme dear – then sell”. That’s how the big boys become wealthy.

“It was not my thinking…”



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