（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. sGXyV9JCwbLE1bXdkNCnqYdu3J8YvOgNiA8NAUXJknhSKDRGxL9/vcE0aCzOPoLw

（Original Chinese）

THERE is always the temptation in the stock market，after a period of success，to become careless or excessively ambitious.Then it requires sound common sense and clear thinking to keep what you have.But it is not necessary to lose your money，once you have acquired it，if you will hold fast to sound principles.

We know that prices move up and down.They always have and they always will.My theory is that behind these major movements is an irresistible force.That is all one needs to know.It is not well to be too curious about all the reasons behind price movements.You risk the danger of clouding your mind with non-essentials.Just recognize that the movement is there and take advantage of it by steering your speculative ship along with the tide.Do not argue with the condition，and most of all，do not try to combat it.

Remember too that it is dangerous to start spreading out all over the market.By this I mean，do not have an interest in too many stocks at one time.It is much easier to watch a few than many.I made that mistake years ago and it cost me money.

Another mistake I made was to permit myself to turn completely bearish or bullish on the whole market，because one stock in some particular group had plainly reversed its course from the general market trend.Before making a new commitment，I should have been patient and a waited the time，when some stock in another group had indicated to me that its decline or advance had ended.In time，other stocks would clearly give the same indication.Those are the cues I should have waited for.

But instead of doing so，I felt the costly urge of getting busy in the whole market.Thus I permitted the hankering for activity to replace common sense and judgment.Of course I made money on my trades in the first and second groups.But I chipped away a substantial part of it by entering other groups before the zero hour had arrived.

Back in the wild bull markets of the late twenties I saw clearly that the advance in the copper stocks had come to an end.A short time later the advance in the motor group reached its zenith.Because the bull market in those two groups had terminated，I soon arrived at the faulty conclusion that I could safely sell everything.I should hate to tell you the amount of money I lost by acting upon that premise.

While I was piling up huge paper profits on my copper and motor deals，I lost even more in the next six months trying to find the top of the utility group.Eventually this and other groups reached their peaks.By that time Anaconda was selling 50 points below its previous high and the motor stocks in about the same ratio.

What I wish to impress upon you is the fact that when you clearly see a move coming in a particular group，act upon it.But do not let yourself act in the same way in some other group，until you plainly sec signs that the second group is in a position to follow suit.Have patience and wait.In time you will get the same tip-off in other groups that you received in the first group.Just don't spread out over the market.

Confine your studies of movements to the prominent stocks of the day.If you cannot make money out of the leading active issues，you are not going to make money out of the stock market as a whole.

Just as styles in women's gowns and hats and costume jewelry are forever changing with time，the old leaders of the stock market are dropped and new ones rise up to take their places.Years ago the chief leaders were the railroads，American Sugar，and Tobacco.Then came the steels，and American Sugar and Tobacco were nudged into the background.Then came the motors，and so on up to the present time.Today we have only four groups in the position of dominating the market：steels，motors，aircraft stocks，and mail orders.As they go，so goes the whole market.In the course of time new leaders will come to the front；some of the old leaders will be dropped.It will always be that way as long as there is a stock market.

Definitely it is not safe to try to keep account of too many stocks at one time.You will become entangled and confused.Try to analyze comparatively few groups.You will find it is much easier to obtain a true picture that way than if you tried to dissect the whole market.If you analyze correctly the course of two stocks in the four prominent groups，you need not worry about what the rest are going to do.It becomes the old story of"follow the leader."Keep mentally flexible.Remember the leaders of today may not be the leaders two years from now.

Today，in my records I keep four individual groups.That does not mean I am trading in all of the groups at the same time.But I have a genuine purpose in mind.

When I first became interested in the movement of prices long，long ago，I decided to test my ability to anticipate correctly forthcoming movements.I recorded fictitious trades in a little book which was always with me.In the course of time，I made my first actual trade.I never will forget that trade.I had half-interest in a purchase of five shares of Chicago，Burlington&Quincy Railway Stock，bought with a friend of mine，and my share of the profit amounted to$3.12.From that time on I became a speculator on my own.

Under conditions as they currently exist，I do not believe that a speculator of the old type who traded in huge volume has much chance of success.When I say a speculator of the old type，I am thinking of the days when markets were very broad and liquid and when a speculator might take a position with 5，000 or 10，000 shares of a stock and move in and out without greatly influencing the price.

After taking his initial position，if the stock acted right，the speculator could safely add to his line from that time forward.In former times，if his judgment proved faulty，he could move out of his position easily without taking too serious a loss.But today，if his first position proved untenable，he would suffer a devastating loss in changing about because of the comparative narrowness of the market.

On the other hand，as I have implied previously，the speculator of today who has the patience and judgment to wait the proper time for acting has，in my opinion，a better chance of cashing in good profits eventually，because the current market does not lend itself to so many artificial movements，movements that far too frequently in the old days jarred all scientific calculations out of kilter.

It is obvious，therefore，that in light of conditions which exist today，no speculator who is intelligent will permit himself to operate on that scale which was more or less a commonplace some years ago.He will study a limited number of groups and of leaders in those groups.He will learn to look before he leaps.For a new age of markets has been ushered in——an age that offers safer opportunities for the reasonable，studious，competent investor and speculator. sGXyV9JCwbLE1bXdkNCnqYdu3J8YvOgNiA8NAUXJknhSKDRGxL9/vcE0aCzOPoLw