1--What margins are necessary to reasonable safety? 2--Is it better to study the entire list or make a specialty of one stock? 3--What class of securities is the safest? 4--What may be considered a fair rally or reaction in stock prices under ordinary circumstances? 5--What is the best general method of trading? Some of these questions have been answered in the preceding chapters, but they will be taken up here in turn and the writer’s views submitted on each head. 1--What margins are necessary to reasonable safety? There is no unqualified answer to this question. The price of the shares operated in must be considered. All other things being equal, a stock selling at $50 would require only half the margin employed in operating in a security selling at $100. If the $50 stock declines 25 points, it has suffered a quoted loss of half its value. The $100 stock, however, must decline 50 points to suffer an equal loss. This percentage of advance or decline is established with remarkable fidelity in every considerable movement. If the scale order is employed as a method of accumulating shares, extraordinary marginal provisions must be made, for even as the line acquired increases, the original margin dwindles. The scale order is, or should be, based on the assumption that a temporary decline below the first purchase price is desirable and is necessary to the best results. This fact, however, should never be contorted in such a manner as to instigate purchases at high prices. If the operator who employs the scale order will try to make the first purchase at what he considers a bargain price, or in other words at what he calculates to be the very bottom of a movement, he will surely find that in nine cases out of ten, his own errors or the velocity which frequently carries prices to ridiculously low or high points will enable him to accumulate his line to advantage. The scale order should never be used on its mechanical merits alone, but merely as a method of averaging. It goes without saying that marginal necessities will be principally gauged by the correctness of the speculator’s general views. It is the writer’s opinion, that if care and intelligence is used in judging values, conditions, and the stages of the market, a margin of 20% will be sufficient in almost all cases. That is to say, 20 points on a stock selling at par and 10 points on a stock selling at 50. It must be distinctly understood, however, that this opinion contemplates purchases at low prices after a decline has occurred; and when both the technical and general conditions warrant purchases.