（Original Chinese）

STOCKS，like individuals，have character and personality.Some are high-strung，nervous，and jumpy；others are forthright，direct，logical.One comes to know and respect individual securities.Their action is predictable under varying sets of conditions.

Markets never stand still.They are very dull at times，but they are not resting at one price.They are either moving up or down a fraction.When a stock gets into a definite trend，it works automatically and consistently along certain lines throughout the progress of its move.

At the beginning of the move you will notice a very large volume of sales with gradually advancing prices for a few days.Then what I term a"Normal Reaction"will occur.On that reaction the sales volume will be much less than on the previous days of its advance.Now that little reaction is only normal.Never be afraid of the normal movement.But be very fearful of abnormal movements.

In a day or two activity will start again，and the volume will increase.If it is a real movement，in a short space of time the natural，normal reaction will have been recovered，and the stock will be selling in new high territory.That movement should continue strong for a few days with only minor daily reactions.Sooner or later it will reach a point where it is due for another normal reaction.When it occurs，it should be on the same lines as the first reaction，because that is the natural way any stock will act when it is in a definite trend.At the first part of a movement of this kind the distance above the previous high point to the next high point is not very great.But as time goes on you will notice that it is making much faster headway on the upside.

Let me illustrate：Take a stock that starts at 50.On the first leg of the movement it might gradually sell up to 54.A day or two of normal reaction might carry it back to 521/2 or so.Three days later it is on its way again.In that time it might go up to 59 or 60 before the normal reaction would occur.But instead of reacting，say，only a point or a point and one-half，a natural reaction from that level could easily be 3 points.

When it resumes its advance again in a few days，you will notice that the volume of sales at that time is not nearly as large as it was at the beginning of the move.The stock is becoming harder to buy.That being the case，the next points in the movement will be much more rapid than before.The stock could easily go from the previous high of 60 to 68 or 70 without encountering a natural reaction.When that normal reaction does occur，it could be more severe.It could easily react down to 65 and still have only a normal decline.But assuming that the reaction was five points or thereabouts，it should not be many days before the advance would be resumed，and the stock should be selling at a brand new high price.And that is where the time element comes in.

Don't let the stock go stale on you.After attaining a goodly profit，you must have patience，but don't let patience create a frame of mind that ignores the danger signals.

The stock starts up again，and it has a rise of six or seven points in one day，followed the next day by perhaps eight to ten points——with great activity——but during the last hour of the day all of a sudden it has an abnormal break of seven or eight points.The next morning it extends its reaction another point or so，and then once more starts to advance，closing very strong.But the following day，for some reason，it does not carry through.

That is an immediate danger signal.All during the progress of the move it had nothing but natural and normal reactions.Then all of a sudden an abnormal reaction occurs——and by"abnormal"I mean a reaction in one day of six or more points from an extreme price made in that same day——something it has not had before，and when something happens abnormally stock market wise，it is flashing you a danger signal which must not be ignored.

You have had patience to stay with the stock all during its natural progress.Now have the courage and good sense to honor the danger signal and step aside.

I do not say that these danger signals are always correct because，as stated before，no rules applying to stock fluctuations are 100%right.But if you pay attention to them consistently，in the long run you will profit immensely.

A speculator of great genius once told me："When I see a danger signal handed to me，I don't argue with it.I get out！A few days later，if everything looks all right，I can always get back in again.Thereby I have saved myself a lot of worry and money.I figure it out this way.If I were walking along a railroad track and saw an express train coming at me sixty miles an hour，I would not be damned fool enough not to get off the track and let the train go by.After it had passed，I could always get back on the track again，if I desired."I have always remembered that as a graphic bit of speculative wisdom.

Every judicious speculator is on the alert for danger signals.Curiously，the trouble with most speculators is that something inside of them keeps them from mustering enough courage to close out their commitment when they should.They hesitate and during that period of hesitation they watch the market go many points against them.Then they say："On the next rally I'll get out！"When the next rally comes，as it will eventually，they forget what they intended to do，because in their opinion the market is acting fine again.However，that rally was only a temporary swing which soon plays out，and then the market starts to go down in earnest.And they are in it—

due to their hesitation.If they had been using a guide，it would have told them what to do，not only saving them a lot of money but eliminating their worries.

Again let me say，the human side of every person is the greatest enemy of the average investor or speculator.Why shouldn't a stock rally after it starts down from a big advance？Of course it will rally from some level.But why hope it is going to rally at just the time you want it to rally？Chances are it won't，and if it does，the vacillating type of speculator may not take advantage of it.

What I am trying to make clear to that part of the public which desires to regard speculation as a serious business，and I wish deliberately to reiterate it，is that wishful thinking must be banished；that one cannot be successful by speculating every day or every week；that there are only a few times a year，possibly four or five，when you should allow yourself to make any commitment at all.In the interims you are letting the market shape itself for the next big movement.

If you have timed the movement correctly，your first commitment will show you a profit at the start.From then on，all that is required of you is to be alert，watching for the appearance of the danger signal to tell you to step aside and convert paper profits into real money.

Remember this：When you are doing nothing，those speculators who feel they must trade day in and day out，are laying the foundation for your next venture.You will reap benefits from their mistakes.

Speculation is far too exciting.Most people who speculate hound the brokerage offices or receive frequent telephone calls，and after the business day they talk markets with friends at all gatherings.The ticker or translux is always on their minds.They are so engrossed with the minor ups and downs that they miss the big movements.Almost invariably the vast majority have commitments on the wrong side when the broad trend swings under way.The speculator who insists on trying to profit from daily minor movements will never be in a position to take advantage of the next important change marketwise when it occurs.

Such weaknesses can be corrected by keeping and studying records of stock price movements and how they occur，and by taking the time element carefully into account.

Many years ago I heard of a remarkably successful speculator who lived in the California mountains and received quotations three days old.Two or three times a year he would call on his San Francisco broker and begin writing out orders to buy or sell，depending upon his market position.A friend of mine，who spent time in the broker's office，became curious and made inquiries.His astonishment mounted when he learned of the man's extreme detachment from market facilities，his rare visits，and，on occasions，his tremendous volume of trade.Finally he was introduced，and in the course of conversation inquired of this man from the mountains how he could keep track of the stock market at such an isolated distance.

"Well，"he replied，"I make speculation a business.I would be a failure if I were in the confusion of things and let myself be distracted by minor changes.I like to be away where I can think.You see，I keep a record of what has happened，after it has happened，and it gives me a rather clear picture of what markets are doing.Real movements do not end the day they start.It takes time to complete the end of a genuine movement.By being up in the mountains I am in a position to give these movements all the time they need.But a day comes when I get some prices out of the paper and put them down in my records.I notice the prices I record are not conforming to the same pattern of movements that has been apparent for some time.Right then I make up my mind.I go to town and get busy."

That happened many years ago.Consistently，the man from the mountains，over a long period of time，drew funds abundantly from the stock market.He was something of an inspiration to me.I went to work harder than ever trying to blend the time element with all the other data I had compiled.By constant effort I was able to bring my records into a co-ordination that aided me to a surprising degree in anticipating coming movements. xBukKNczW9fHu+2B+TIZS/69z+skLZpanQsqEwzKeJzGr/f0K8hoy2iNupx2YVMt