There are perhaps very few speculators of the haphazard type who take the trouble to find out the extent and power of the hidden forces that are arrayed against them in the markets. Every stock, it should be remembered, has either a small or large market to itself. In some stocks it is possible any time of the day to deal at ?16 price,[35] while in others there may be a difference of 1, 2, 3, or even 5 per cent. under certain circumstances, between the buying and the selling price. A speculator operating in a stock in which he can always deal at a close price is able to undo his bargain with only a trifling loss probably, if he finds out at once that he has operated under some misapprehension; but if he has bought a stock the purchase price of which is say 35, and if he wants to sell he can only get 34, he has incurred a loss of 1 per cent., besides the commission, before he can cancel the bargain. This belongs obviously to the alphabet of the business, but the haphazard speculator seldom learns his alphabet until the use of it is no longer of any value.

A broker, it may be said, should warn his client before putting him into a stock the price of which is wide; but unfortunately such warnings do not increase the number of commissions, and, apart from that, if a speculator does not take the trouble to inform himself accurately upon such a point, placing no reliance upon the advice of any one, he deserves to lose his money. Some markets are so small that a speculator once in, is what is called “roasted” before he is let out again. A particular man very often is the only dealer in the market in a certain stock of which perhaps the supply is also very limited. Under such circumstances a haphazard speculator who may chance to have observed some rather violent fluctuations thinks there is a good opportunity to make some money, and he sells a little bear of a couple of thousand pounds nominal of stock. The round sum, and the channel through which the sale comes, helps the jobber to read the operation. The decoy-duck in the shape of the fluctuations in price, lures two or three more sportsmen on to the dangerous ground, and when they want to get out the price is put up against them, and they are quietly mulcted of £50 each, without a chance of getting even a sight of their enemy, or any value for their money but experience.

A speculator who consults a not over-scrupulous broker as to the best thing to buy for the rise, runs the risk of taking some stock off the broker’s hands that he is desirous to get rid of. It is far better that a broker should not be exposed to such a temptation, and a speculator will do well to make it one of his maxims to put no trust in any one when he is engaged in a business in which it is the object of everybody with whom he comes in contact to make something out of him.

Supposing a broker is not directly interested in any particular stock when a client who is in doubt what to do consults him; it does not then follow that the client can depend upon getting absolutely disinterested opinions. The broker may have just put some other clients into a certain stock, and with a view to his own advantage, by helping to make money for them, he will lean probably to some extent in the direction of advising others to purchase the same stock.

There is an old saying that it is unadvisable to have all your eggs in one basket, a saw that is constantly quoted among both bona fide investors, as well as among speculators. A broker is not desirous that his clients who speculate should be interested very largely in one stock. He prefers to have the liability spread over the market, for obvious reasons. If a client fancies a particular stock, or has good reasons for believing it is about to improve, and he goes to his broker with a view to increase his stake, he will not receive the same encouragement as if he selected something else. The influence thus brought to bear arises from selfish motives, and proves again that the client should keep his own counsel. If he have no decided views himself, it is certain he had better do nothing, for speculation thus entered upon is doubly and childishly haphazard.

The more organized methods of speculation which prevail in these times, cause the public to be mulcted of their money in a much more wholesale manner than was the case formerly. They are now driven like sheep, or rather enticed into a pen, and there mercilessly squeezed until they are glad, like some of the players at Homberg have been, to have their third-class fare paid home. A number of brokers or jobbers, or both, in the markets will be instructed to run a stock up, after a goodly number of bears have been decoyed in by a gently falling price from day to day, seasoned with unfavourable reports. Those who are able to command a sight of the jobber’s books, know of course exactly the position of affairs, and the price is rigged until the weak speculators for the fall are simply frightened in. This is done upon even a more extensive scale in the opposite direction, for the simple reason that the general public as speculators, are bulls by nature. Bear operations seem to go against the grain of the average man who acquires a first taste for speculation, probably by possessing some amount of stock which improves in price after he has bought. Money thus easily made, as it seems to be, out of nothing, encourages other purchases with a view to resale before the settling day arrives. Thus small figures grow to large ones; and small profits, in frequent attempts to multiply them, usually end in large losses. A good stock, or the shares of a good company, that has long been discredited from a cause which may be suddenly removed, has frequently been used for literally flaying the public when they have rushed in as bulls. A memorable case in point was the rigging of the shares of the Erie Railway Company. Upon the occasion of the assassination of Fisk, jun., the shares were run up and the public enticed in by daily advancing figures far above the actual merits of the shares, from a dividend point of view. Numbers of persons were induced to believe the price would range high from that moment. The quotation subsequently declined, and one by one the unhappy bulls were disgusted into taking their losses, whilst those who had rigged the market were following them down as bears, and making a fine thing out of the affair. The same game was played with the public when Jay Gould was ousted from the presidency of the Company, when the price was run up to 57½, and gradually went back, even as low at one time as to 28, afterwards recovering to about 50. As compared with the professional tricksters who manage these riggings of the markets, even the best of the outside speculators, who have had long experience and think they can stand on one side and profit by the gullibility of the public, discover themselves frequently the wrong way, when the course of the market for some time at length reveals unmistakably the drift of the experts behind the scenes. The man who must speculate should be early in, and early out, being contented with a cut off the loaf and pass it on; for it is the profits missed that ruin the speculator.

There is scarcely a more important point to which to draw attention, than that of being contented to watch for an opportunity. It is fatal to the success of a speculator to be always with stock open in the markets. The casual observer must be well aware[36] that now and again a small panic occurs, and the general level of values is knocked down perhaps two, three, or on serious occasions as much as four per cent., according to the inflated state of particular stocks at the time. A speculator who has twenty or thirty thousand pounds nominal of stock open at such a time, stands in a moment to lose eight or twelve hundred pounds at a blow. With such a contingency always hanging over him, it must be evident to the prudent man that in order not to expose himself more than he can possibly help to such a catastrophe, which may happen at any moment, he should operate, be contented with a moderate profit, and close.[37] The obvious advantage of looking on for comparatively long periods, and having commitments for short periods is, that the chances will be much more in favour of the speculator when a panic causes a heavy fall. He is then free to buy at prices which are sure to be unduly depressed, and instead of the dreary waiting to recover from losses incurred, he makes in a very short time probably a handsome profit, again retiring to avoid the reaction that follows a sharp recovery, to await a similar favourable opportunity. To be overtaken, with large amounts of stock open for the rise, by a panic which engulphs a speculator’s money and upsets his judgment at the same time, is among the least excusable faults when committed by the man who starts upon any system. The haphazard speculator is almost sure to have accounts open when a panic takes place, because he is, as a rule, in a fever lest he shall miss a rise, and is, therefore, never contented unless he is “in the swim,” and hence the severe handling he gets by never seeing the cataract until he is half way to the bottom.