what is gatsby doing when nick first sees him?

When Nick first sees Gatsby, Gatsby is standing on his balcony holding his arms out to a green light across the sound. This green light turns out to be the green light on the dock of Daisy Buchanan's house. Daisy Buchanan is Gatsby's former lover from five years before everything that happens in this novel. Daisy married Tom Buchanan, a rich man, before Gatsby returned from the war so Gatsby simply bought a house across the sound from where Daisy and Tom live and watch the green light in longing over his lover. In fact, Gatsby even hosts great parties where nearly everyone comes just in the hope that Daisy will one day show up to a party along with the rest of the people. Thus, Gatsby's watching the green light across the sound is very representative of his one desire in the novel: to be with Daisy again.

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