（Original Chinese）

The game of speculation is the most uniformly fascinating game in the world.But it is not a game for the stupid，the mentally lazy，the man of inferior emotional balance，nor for the get-rich-quick adventurer.They will die poor.

Over a long period of years I have rarely attended a dinner party including strangers that someone did not sit down beside me and after the usual pleasantries inquire：

"How can I make some money in the market？"

In my younger days I would go to considerable pains to explain all the difficulties faced by the one who simply wishes to take quick and easy money out of the market；or through courteous evasiveness I would work my way out of the snare.In later years my answer has been a blunt"I don't know."

It is difficult to exercise patience with such people.In the first place，the inquiry is not a compliment to the man who has made a scientific study of investment and speculation.It would be as fair for the layman to ask an attorney or a surgeon：

"How can I make some quick money in law or surgery？"

I have come to the conviction，however，that larger numbers of people interested in stock-market investments and speculation would be willing to work and study to attain sensible results，if they had a guide or signpost pointing the right direction.And it is for them that this book is written.

It is my purpose to include some of the highlights of a lifetime of speculative experience——a record of some of the failures and successes and the lessons that each has taught.Out of it all emerges my theory of time element in trading，which I regard as the most important factor in successful speculation.

But before we go further，let me warn you that the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records，doing your own thinking，and reaching your own conclusions.You cannot wisely read a book on"How to Keep Fit"and leave the physical exercises to another.Nor can you delegate to another the task of keeping your records，if you are to follow faithfully my formula for combining the time element and prices，as set forth in subsequent pages.

I can only light the way，and I shall be happy，if through my guidance，you are able to take more money out of the stock market than you put in.

In this book，I present to that portion of the public，which at times may be speculatively inclined，some points and ideas which have been garnered during my many years as an investor and speculator.Anyone who is inclined to speculate should look at speculation as a business and treat it as such and not regard it as a pure gamble as so many people are apt to do.If I am correct in the premise that speculation is a business in itself，those engaging in that business should determine to learn and understand it to the best of their ability with informative data available.In the forty years which I have devoted to making speculation a successful business venture，I have discovered and still am discovering new rules to apply to that business.

On many occasions I have gone to bed wondering why I had not been able to foresee a certain imminent move，and awakened in the early hours of the ensuing morning with a new idea formulated.I was impatient for the morning to arrive in order to start checking over my records of past movements to determine whether the new idea had merit.In most cases it was far from being 100%right，but what good there was in it was stored away in my subconscious mind.Perhaps，later，another idea would take form and I would immediately set to work checking it over.

In time these various ideas began to crystallize and I was able to develop a concrete method of keeping records in such a form that I could use them as a guide.

My theory and practical application have proved to my satisfaction that nothing new ever occurs in the business of speculating or investing in securities or commodities.There are times when one should speculate，and just as surely there are times when one should not speculate.There is a very true adage："You can beat a horse race，but you can't beat the races."So it is with market operations.There are times when money can be made investing and speculating in stocks，but money cannot consistently be made trading every day or every week during the year.Only the foolhardy will try it.It just is not in the cards and cannot be done.

To invest or speculate successfully，one must form an opinion as to what the next move of importance will be in a given stock.Speculation is nothing more than anticipating coming movements.In order to anticipate correctly，one must have a definite basis for that anticipation.For instance，analyze in your own mind the effect，marketwise，that a certain piece of news which has been made public may have in relation to the market.Try to anticipate the psychological effect of this particular item on the mind of the public——particularly that portion of the public which primarily is interested.If you believe it likely to have a definite bullish or bearish effect marketwise，don't trust your own opinion and back your judgment until the action of the market itself confirms your opinion because the effect marketwise may not be as pronounced as you are inclined to believe it should be.To illustrate：After the market has been in a definite trend for a given period，a bullish or bearish piece of news may not have the slightest effect on the market.The market itself at the time may be in an overbought or oversold condition，in which ease the effect of that particular news would certainly be ignored.At such times the recording value of past performances under similar conditions becomes of inestimable value to the investor or speculator.At such times he must entirely ignore personal opinion and apply strict attention to the action of the market itself.Markets are never wrong——opinions often are.The latter are of no value to the investor or speculator unless the market acts in accordance with his ideas.No one man，or group of men，can make or break a market today.One may form an opinion regarding a certain stock and believe that it is going to have a pronounced move，either up or down，and eventually be correct in his opinion but will lose money by presuming or acting on his opinion too soon.

Believing it to be right，he acts immediately，only to find that after he has made his commitment，the stock goes the other way.The market becomes narrow，he becomes tired and goes out.Perhaps a few days later it begins to look all right，and in he goes again，but no sooner has he re-entered it than it turns against him once more.Once more he begins to doubt his opinion and sells out.Finally the move starts up.Having been too hasty and having made two erroneous commitments，he loses courage.It is also likely that he has made other commitments and is not in a position to assume more.Thus，by the time the real move in the stock he jumped into prematurely is on，he is out of it.

The point I would here emphasize is that after forming a definite opinion with respect to a certain stock or stocks——do not be too anxious to get into it.Wait and watch the action of that stock or stocks marketwise.Have a fundamental basis to be guided by.Say，for instance，a stock is selling around$25.00 and has been holding within a range of$22.00 to$28.00 for a considerable period.Assuming that you believe that the stock should eventually sell at$50.00，and it is$25.00 at the time，and in your opinion it will sell at$50.00，have patience and wait until the stock becomes active，until it makes a new high，say around$30.00.You will then know that marketwise you have been justified.The stock must have gone into a very strong position，or it would not have reached$30.00.Having done so，it is altogether likely that it is on its way to a very definite advance——the move is on.That is the time for you to back your opinion.Don't let the fact that you did not buy at$25.00 cause you any aggravation.The chances are if you had，you would have become tired of waiting and would have been out of it when the move started，because having once gotten out at a lower price，you would have become disgruntled and would not have gone back in when you should have.

Experience has proved to me that the real money made in speculating has been in commitments in a stock or commodity showing a profit right from the start.Later on，when some examples of my trading operations are given，you will notice I made my first trade at the psychological time——that is，at a time where the force of the movement was so strong that it simply had to carry through.Not on my operation but because the force was so strong behind that particular stock.It simply had to and did go.There have been many times when I，like many other speculators，have not had the patience to await the sure thing.I wanted to have an interest at all times.You may say："With all your experience，why did you allow yourself to do so？"The answer to that is that I am human and subject to human weaknesses.Like all speculators，I permitted impatience to out-maneuver good judgment.Speculation is very similar to playing a game of cards，whether it be poker，bridge or any similar game.Each of us is possessed with the common weakness of wanting to have an interest in every jackpot，and we certainly would like to play every hand at bridge.It is this human frailty which we all possess in some degree that becomes the investor's and speculator's greatest enemy and will eventually，if not safeguarded，bring about his down fall.It is a human trait to be hopeful and equally so to be fearful，but when you inject hope and fear into the business of speculation，you are faced with a very formidable hazard，because you are apt to get the two confused and in reverse positions.

As an illustration：You buy a stock at$30.00.The next day it has a quick run-up to$32.00 or$32.50.You immediately become fearful that if you don't take the profit，the next day you may see it fade away——so out you go with a small profit，when that is the very time you should entertain all the hope in the world.Why should you worry about losing two points'profit which you did not have the previous day？If you earn make two points'profit in one day，you might make two or three the next，and perhaps five more the next week.As long as a stock is acting right，and the market is right，do not be in a hurry to take a profit.You know you are right，because if you were not，you would have no profit at all.Let it ride and ride along with it.It may grow into a very large profit，and as long as the action of the market does not give you any cause to worry，have the courage of your convictions and stay with it.On the other hand，suppose you buy a stock at$30.00，and the next day it goes to$28.00，showing a two-point loss.You would not be fearful that the next day would possibly see a three-point loss or more.No，you would regard it merely as a temporary reaction，feeling certain that the next day it would recover its loss.But that is the time that you should be worried.That two point loss could be followed by two points the next day，or possibly five or ten within the next week or two.That is when you should be fearful，because if you do not get out，you might be forced to take a much greater loss later on.That is the time you should protect yourself by selling your stock before the loss assumes larger proportions.

Profits always take care of themselves，but losses never do.The speculator has to insure himself against considerable losses by taking the first small loss.In so doing，he keeps his account in order so that at some future time，when he has a constructive idea，he will be in a position to go into another deal，taking on the same amount of stock as he had when he was wrong.The speculator has to be his own insurance broker，and the only way he can continue in business is to guard his capital account and never permit himself to lose enough to jeopardize his operations at some future date when his market judgment is correct.While I believe that the successful investor or speculator must have well advanced reasons for making commitments on either side of the market，I feel he must also be able through some form of a specific guide to determine when to make his first commitments.

Let me repeat，there are definitely certain times when a movement really gets under way，and I firmly believe that anyone who has the instinct of a speculator and has the patience，can devise a specific method to be used as a guide which will permit him to judge correctly when to make his initial commitment.Successful speculation is anything but a mere guess.To be consistently successful，an investor or speculator must have rules to guide him.Certain guides which I utilize may be of no value to anyone else.Why is that so？If they are of inestimable value to me，why should they not serve you equally well？The answer to that is——no guide can be 100%right.If I use a certain guide，my own pet one，I know what should be the result.If my stock does not act as I anticipated，I immediately determine the time is not yet ripe——so I close out my commitment.Perhaps a few days later my guide indicates I should get in again，so back I go，and probably this time it is 100%correct.I believe anyone who will take the time and trouble to study price movements should in time be able to develop a guide，which will aid him in future operations or investments.In this book I present some points which I have found valuable in my own speculative operations.

A great many traders keep charts or records of averages.They chase them around，up and down，and there is no question that these charts or averages do point out a definite trend at times.Personally，charts have never appealed to me.I think they are altogether too confusing.Nevertheless，I am just as much of a fanatic in keeping records as other people are in maintaining charts.They may be right，and I may be wrong.

My preference for records is due to the fact that my recording method gives me a clear picture of what is happening.But it was not until I began to take into consideration the time element that my records really became useful in helping me to anticipate coming movements of importance.I believe that by keeping proper records and taking the time element into consideration——and I shall explain this in detail later——one can with a fair degree of accuracy forecast coming movements of importance.But it takes patience to do so.

Familiarize yourself with a stock，or different groups of stocks，and if you figure the time element correctly in conjunction with your records，sooner or later you will be able to determine when a major move is due.If you read your records correctly，you will pick the leading stock in any group.You must，I repeat，keep your own records.You must put down your own figures.Don't let anyone else do it for you.You will be surprised how many new ideas you will formulate in so doing，ideas which no one else could give to you，because they are your discovery，your secret，and you should keep them your secret.

I offer in this book some DON'TS for investors and speculators.One of the primary rules is that one should never permit speculative ventures to run into investments.Investors often take tremendous losses for no other reason than that their stocks are bought and paid for.

How often have you heard an investor say："I don't have to worry about fluctuations or margin calls.I never speculate.When I buy stocks，I buy them for an investment，and if they go down，eventually they will come back."

But unhappily for such investors many stocks bought at a time when they were deemed good investments have later met with drastically changed conditions.Hence such so-called"investment stocks"frequently become purely speculative.Some go out of existence altogether.The original"investment"evaporates into thin air along with the capital of the investor.This occurrence is due to the failure to realize that so-called"investments"may be called upon in the future to face a new set of conditions which would jeopardize the earning capacity of the stock，originally bought for a permanent investment.Before the investor learns of this changed situation，the value of his investment is already greatly depreciated.Therefore the investor must guard his capital account just as the successful speculator does in his speculative ventures.If this were done，those who like to call themselves"investors"would not be forced to become unwilling speculators of the future——nor would trust fund accounts depreciate so much in their value.

You will recall not so many years ago it was considered safer to have your money invested in the New York，New Haven&Hartford Railroad than to have it in a bank.On April 28，1902，New Haven was selling at$255 a share.In December of 1906，Chicago，Milwaukee&St.Paul sold at$199.62.In January of that same year Chicago Northwestern sold at$240 a share.On February 9 of that year Great Northern Railway sold at$348 a share.All were paying good dividends.Look at those"investments"today：On January 2，1940，they were quoted at the following prices：New York，New Haven&Hartford Railroad$0.50 per share；Chicago Northwestern at 5/16，which is about$0.31 per share；Great Northern Railway at$26.62%per share.On January 2，1940，there was no quotation for Chicago，Milwaukee&St.Paul——but on January 5，1940，it was quoted at$0.25 per share.

It would be simple to run down the list of hundreds of stocks which，in my time，have been considered gilt edged investments，and which today are worth little or nothing.Thus，great investments tumble，and with them the fortunes of so-called conservative investors in the continuous distribution of wealth.

Speculators in stock markets have lost money.But I believe it is a safe statement that the money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.

From my viewpoint，the investors are the big gamblers.They make a bet，stay with it，and if it goes wrong，they lose it all.The speculator might buy at the same time.But if he is an intelligent speculator，he will recognize——if he keeps records——the danger signal warning him all is not well.He will，by acting promptly，hold his losses to a minimum and await a more favorable opportunity to reenter the market.

When a stock starts sliding downward，no one can tell how far it will go.Nor can anyone guess the ultimate top on a stock in a broad upward movement.A few thoughts should be kept uppermost in mind.One is：Never sell a stock，because it seems high-priced.You may watch the stock go from 10 to 50 and decide that it is selling at too high a level.That is the time to determine what is to prevent it from starting at 50 and going to 150 under favorable earning conditions and good corporate management.Many have lost their capital funds by selling a stock short after a long upward movement，when it"seemed too high."

Conversely，never buy a stock because it has had a big decline from its previous high.The likelihood is that the decline is based on a very good reason.That stock may still be selling at an extremely high price——even if the current level seems low.Try to forget its past high range and study it on the basis of the formula which combines timing and price.

It may surprise many to know that in my method of trading，when I see by my records that an upward trend is in progress，I become a buyer as soon as a stock makes a new high on its movement，after having had a normal reaction.The same applies whenever I take the short side.Why？Because I am following the trend at the time.My records signal me to go ahead！

I never buy on reactions or go short on rallies.

One other point：It is foolhardy to make a second trade，if your first trade shows you a loss.Never average losses.Let that thought be written indelibly upon your mind. fV8ujmxAy16HtRSQE1FO3Ph5BmGZuv+Iu/FkofGqfJPrm74+2S8OTqGSsXC0yjCo