Transcriber’s Note Italic text displayed as: _italic_ PSYCHOLOGY OF THE STOCK MARKET By G. C. Selden Author of “Trade Cycles,” “What Makes the Market?” Etc. TICKER PUBLISHING COMPANY 2 RECTOR STREET NEW YORK PREFACE This book is based upon the belief that the movements of prices on the exchanges are dependent to a very large degree on the mental attitude of the investing and trading public. It is the result of years of study and experience as fellow at Columbia University, news writer, statistician, on the editorial staff of THE MAGAZINE OF WALL STREET, etc. The book is intended chiefly as a practical help to that considerable part of the community which is interested, directly or indirectly, in the markets; but it is hoped that it may also have some scientific value as a preliminary discussion in a new field, where opportunities for further research seem almost unlimited. G. C. SELDEN. New York, May 28, 1912. Copyright, 1912 Ticker Publishing Company CONTENTS. I. The Speculative Cycle 9 II. Inverted Reasoning and Its Consequences 27 III. “They” 39 IV. Confusing the Present with the Future—Discounting 55 V. Confusing the Personal with the General 71 VI. The Panic and the Boom 87 VII. The Psychology of Scale Orders 101 VIII. The Mental Attitude of the Individual 109 I—The Speculative Cycle Most experienced professional traders in the stock market will readily admit that the minor fluctuations, amounting to perhaps five or ten dollars a share in the active speculative issues, are chiefly psychological. They result from varying attitudes of the public mind, or, more strictly, from the mental attitudes of those persons who are interested in the market at the time. Such fluctuations may be, and often are, based on “fundamental” conditions—that is, on real changes in the dividend prospects of the stocks affected or on variations in the earning power of the corporations represented—and again they may not. The broad movements of the market, covering periods of months or even years, are always the result of general financial conditions; but the smaller intermediate fluctuations represent changes in the state of the public mind, which may or may not coincide with alterations in basic factors. To bring out clearly the degree to which psychology enters into the stock market problem from day to day, it is only necessary to reproduce a conversation between professional traders such as may be heard almost any day in New street or in the neighboring cafés. “Well, what do you know?” says one trader to the other. “Just covered my Steel,” is the reply. “Too much company. Everybody seems to be short.”