PREFACE.
Some years ago I came across a book, called “Crump’s Theory of Stock Speculation,” which had gone through several editions in England; and the practical wisdom expressed therein impressed me so forcibly that ever since then I formed the project of publishing an American edition.
The reader may be astonished that, as a broker, I desire to give such a book a larger circulation than it possessed heretofore, as the natural conclusion would be that it might injure my business. I feel, however, that it is not so, and think that a broker loses nothing by doing his duty in warning his clients against danger, and showing them the pitfalls.
I do not quite agree with the author of the book on every point, especially when he seeks to convey the impression that it would seem almost impossible that any profit could be derived from Stock Exchange speculation. During my long experience I have seen many speculators accumulate large fortunes, and I believe that when speculation is conducted by a clear-headed man, as a matter of business and not as a matter of amusement, it offers great chances.
Where the strength of Mr. Crump’s work lies is in his showing what attributes of character a man must possess to be successful, and with these attributes a man must prove successful in stock speculation as well as in any other business. Condensed, these attributes are: first, a clear head; second, capital; and third, patience.
I do not agree with Mr. Crump, that a speculator, to be successful, must be a hard-hearted, selfish man. I found it different with most of the prominent men in Wall Street. Of course, if a Gould or a Vanderbilt buys up a whole railroad, he cannot very well take many people into his confidence; but these men are not what is generally called speculators—they are generals or diplomats, and they are not different in their actions from generals in warfare or diplomats in politics.
Outside of this class, I found generally, when I asked one of the prominent speculators for his opinion of the market, that he gave me his true and candid opinion of the future of the market; and the probabilities are that, if even not acting on this opinion at that very moment, his general policy was based on such a forecast of the market’s condition.
The strength of the successful speculator lies in his observing the important principle set forth by Mr. Crump on page 60 of his work. “Speculators never set sufficient value on the importance of avoiding a loss—they think only of the profits.” As it is with our money affairs when we say, “Look after the pence; the pounds will take care of themselves,” so it is with speculation. Look after the losses; the profits will take care of themselves. Never refuse a profit, is a golden motto for speculators, which unhappily few of them, in their greediness, have the courage to adopt. The observance of this rule is the main cause of the success of the best speculators, and the non-observance is the cause of failure of even their confidential friends.
Very few fortunes have been made in Wall Street at one stroke. Fortunes which were made in that way were generally lost again in a very short time. Most of the long, lasting, and solid fortunes were made by a gradual accumulation of profits extending over a great many years. The beginnings of these were sometimes quite small, and, as the capital increased, larger operations were entered into.[1]