IV
Larry went back home. But as soon as he was there, he knew that gathering a stake and returning to New York was his one mission in life. He was compelled, and confident he would succeed. At first, he was rejected from his old stomping grounds. The old Bucket Shops still would not take his orders. In a conversation with other traders, Larry makes the comment that the game cannot be beaten because of the slippage in order fills, especially when you trade using market orders. As it turns out, he repeats this warning in the last paragraph of the book, leaving an ominous ring in the reader’s ear.
After talking with another trader, Larry investigates a local brokerage firm, and relates all manners of underhanded tricks they use to take money from the suckers and newbies. Having no intent on following their tips, or believing their lies, or worse yet, letting them trade his money for him, he went and spoke with the manager of the firm. He was assured that they have great execution – he was able to trade just like in a Bucket Shop. After learning all he could, he set up a small office and ran direct wires to three brokerage firms. For a time he traded slowly and fought for his view when their accounts and records didn’t match his own. These mistakes were uniformly against him, or course. After a while, and a couple instances of being cheated by the tricks of a crooked firm, Larry decided to turn the tables and play the scam on the scammers. He gives a detailed look at how the market can be manipulated for a short period.
For a year, Larry lived a life of balance and patience. He set aside money for his stake, but also allowed himself to live very comfortably as well. Once he had a fair sized bank roll, he set out for New York, his third attempt. He had built himself to ten thousand, and lost that “because I traded out of season all the time…went in and gambled…I hoped to win.” Then he built himself to fifty thousand and lost it in one day – due to the “laggard tape and the unprecedented violence of the movements on that awful day.”
“When you know what not to do in order not to lose money, you begin to learn what to do in order to win.”
