CHAPTER VI.
CACOETHES OPERANDI.
Waiting for Extremes.
Reaction generally more Rapid after a Sharp Rise.
The bane of nearly all speculators of the soft-grained type—by which we mean men whose will and judgment bends this way and that, like a reed that nods allegiance to any quarter of the world according to the blow of the wind—is, that they are for ever on the itch to do something. There is no getting them to wait for an opportunity. There are two sorts of opportunities, and the distinction between them is important. The speculator feels much more at home in availing himself of one than of the other. The man who can wait for extremes is the one who will have the best chance of making extreme profits, provided he can be fairly sure of a good grasp of the duration of passing influences. One kind of opportunity is after a sharp fall in prices. As we have before remarked, most speculators feel more at ease in operating for the rise, and consequently know best what they are about after a fall in prices, and they make themselves bulls. The other kind is after a well sustained rise. But it has been generally observed that speculators sell bears of stock with more timidity than they buy bulls. One reason, no doubt, beyond that referred to is, that they have a feeling in their own minds that in selling for the fall they are going against the current, which on the surface seems to be a rash proceeding. But in being able to combat this feeling lies one of the main elements of success. It is out of the public that successful speculators make their money, and consequently there must be the greater chance of losing by following the lead of the public. Of the two opportunities therefore of which a speculator can avail himself with the most advantage, that of looking on at a rise and opening a bear account at the new prices is, under ordinary circumstances, the most worth his attention, as the reaction is generally more rapid after a sharp rise than after a fall, owing to there being more new interests engaged in causing it. A rapid rise is promoted largely by speculators whose operations for purposes of enticing the public to buy, may be compared to the exertions of a horse in a great race that is entered to make the running for the favourite. Those speculators are more anxious, as a rule, to realize their profits as bulls, off high figures, than they are to close bear accounts; for, when a panic has driven prices down, some time will elapse before confidence revives, and in the meantime it may be renewed.
A person who cannot withstand the itching desire to have an interest in something or other, is almost sure to be a man of that soft texture of character that yields to influences that are unworthy of serious attention, and he will consequently be led into error and loss probably oftener than not, and his operations will end in failure. It must be obvious to every reflecting mind, that so dangerous a game as Stock Exchange speculation, or speculation which partakes of the same nature, in another commodity, entered into, if it be only partly to satisfy a craving for some sort of excitement, is a very unwholesome pastime.[33]
Of all occupations Stock Exchange Speculation is the last to be thought of as an amusement for the man who wishes for some light kind of business that can be done with an off-hand air, and without any of the drudgery that is the real power in money-making. And yet there is no doubt that a large proportion who feed the ever copiously flowing stream of profits that the members of the Stock Exchange are diligently gathering from day to day, are persons who, having nothing better to do, are drawn by an insatiable desire for some occupation into the ranks of the haphazard speculators. Once fairly entangled in the meshes of loss, the struggles to recover it are usually attended by worse disasters.
It may also be shown that a desire to satisfy a craving for a class of excitement which partakes somewhat of the nature of sober business, in its earlier stages at least, allows admission to the mind of an element which makes havoc with the judgment, and consequently forms an ingredient in the nature of a speculator, which is almost sure to bring him sooner or later to grief. Before a man enters upon the business of speculation, he ought, if he is to have a fair chance, to clear his reasoning powers from any such unwholesome encumbrances as even the faintest desire for excitement. Every step a speculator takes should be, as far as possible, as deliberate as if he knew perfectly well that the slightest miscalculation would certainly involve him in loss.
What Not to Do.
In engaging in speculative commitments, the great difficulty that presents itself is not so much what to buy or sell, as what not to buy or sell. When to do something, and when to do nothing. Here lies a problem, the solution of which costs such a number of speculators their money and their peace of mind afterwards, to say nothing of the chronic dyspepsia that afflicts them until they are forced to quit the field.
Special Information.