Partridge has a profit in Climax Motors. The man who recommended the shares now expects a temporary decline and urges him to sell. He could buy them back cheaper and resume profiting from the rise.
Partridge refuses. He sees a bull market, one whose broad direction is upward. A cheaper repurchase might never become available. Selling would give up the position he wants to keep, and he has paid enough to learn that lesson already. We never learn what he eventually earns on Climax.
Larry Livingston, the fictionalized trader narrating Reminiscences of a Stock Operator, comes to understand the refusal. Predicting a rise and staying with it are separate skills. Patient holding depends on a continuing reason to expect the larger move. He accepts temporary reductions in profits he hasn't yet collected while that reason holds, then aims to leave when general conditions turn. Neither the first nor the last fraction of the movement has to belong to him.
What the next order reveals
Waiting starts before a purchase. Livingston sometimes feels obliged to earn something every day and trades when his method gives him no sufficient reason. Reading reports and studying conditions can continue without placing an order. A moving quotation board creates plenty to watch, without necessarily offering anything worth buying.
He often begins with part of the holding he plans to build. Actual orders can test his opinion. In a hypothetical purchase, having to pay progressively higher prices to fill an order suggests strength. Getting everything easily at the old price makes him suspicious. He sells a smaller amount to see how readily buyers absorb it.
Favorable movement encourages him to add. He wants the earlier purchases to show a profit before he commits more. He leaves an unresponsive holding small and makes his biggest commitment after the advance has begun. The intended total remains limited. His orders can also move prices, so their effect cannot automatically count as evidence that other buyers agree.
A price breaking out of an established range can bring fresh pressure. Traders who sold short near its lower boundary, expecting to buy back cheaper, may have to buy if it breaks upward. Buyers attracted near the top may have to sell after a downward break. Closing or reversing those mistaken trades can strengthen the move. Waiting for that evidence means accepting a less favorable entry price.
When his own buying supplies the rise
Cotton teaches him the cost of confusing his demand with everyone else's. He thinks the expected advance needs a little help and buys heavily. Prices rise while he buys, then sink when he stops. He exits and tries again, four or five times, losing about two hundred thousand dollars. The substantial rise begins only after he gives up. His view of the eventual direction was right. His own purchases could not make enough outside buyers arrive when he needed them.
Hope can keep a losing position alive while the evidence against it grows. Fear can close a profitable one while its prospects remain sound. Livingston knows both habits. During a later cotton short, his successful stock trades occupy his attention. Cotton keeps rising. Each time he considers getting out, he decides to wait for a decline. Small declines repeatedly give way to new highs. Finally, concentrating on the trade at Hot Springs, he takes a loss of about a million dollars.
The next day cotton falls and fails to rebound as before. He makes a smaller fresh sale and adds as further declines confirm the change. Eventually he nearly recovers the earlier loss. The old loss gave him no claim on that money. Changed behavior supplied a new reason to trade, once he had allowed the first position to end.
Keeping room to change his mind
Money brings pressures that have nothing to do with the next price. After another cotton disaster, Livingston urgently needs cash and tries to earn it instead of withdrawing it from his remaining balance. His deadline supplies no new opportunity. He keeps trading until the stake disappears. Money can pull the other way too. In a story about his wife, an unexpected gift feels easier to risk, although it can be lost just as completely.
Illness and debt make good judgment harder to use. Livingston becomes sick, nervous and unable to think calmly despite his experience. Later, demands from creditors consume the attention he needs for trading. Releases and bankruptcy relieve that pressure. Renewed broker credit supplies money he cannot produce through patience alone.
A broker offers to finance a limited new position. Livingston worries about spending the opportunity on false starts. For six weeks he studies prices at another office, where he cannot trade. He has arranged his surroundings to make waiting possible. In the recovery trade that follows, he increases his holding after the first purchase advances.
Later profits let him repay his creditors, including those who released him. He puts money into annuities and family trusts intended to resist future spending and trading demands, including his own. His ability to rebuild has depended on other people's money and relief from debt pressure. Once he recovers, he wants some of that wealth beyond the reach of his next confident decision.
Three things to keep
Hold while the reason remains credible, without demanding a perfect exit.
Add to a planned position when outside demand supports it.
Protect the money and attention that let a mistaken trade end.