Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-12-24
THE BUSINESS OF GETTING
AHEAD.
Schemes to Beat the Market.

The deep-seated human yearning for
easy money has long provided
market for the outpourings or tip
sters. Innocents are perpetually
coming to Wall Street in search OF
some secret formula or clever plan
for beating the stock market. They
believe that there is some magic key
which will open the door to great
stores Of riches for them.
The quest for q mechanical plan
for making a killing in the stock
market goes endlessly on. Hopeful
men invent mechanical schemes which
are intended to obviato the need OF
thought in attempting to Judge cur
rent developments at the security
market places. Such schemes seem
predestined to failure because they
ignore the fundamental fact that
speculation is based on individual
judgment. No mechanical system has
yet been devised which records all
the subtle influences that affect prices
and which reliably measures the hui
man element in speculation.
Mechanical Schemes Useful.
Mechanical schemes such as sta.
tistical charts are useful II employed
as a supplement to rather than as a
substitute for Independent thinking
h0 S4AACA ALl0uS0 that 10 II1du0 vi
charts springs from the assumption
that the curves which record price
changes In the future will follow the
same patterns as in the past.
Each business cycle, 1t is true, is
| likely in general form to resemble
| those Of the past, yet each has its
unique characteristics and these can
be determined only by careful analysis
of the current facts about the bust
| ness situation.
Another scheme widely used is the
so-called stop-loss order, which Is
used in order to sell stock at the mar
ket when 1t price declines to a specific
figure. The stop loss order has "A
| useful place In speculative technique.
but Is by no means foolproof.
In; q panicky market it is difficult
to sell stock anywhere near the figure
contemplated in the stop loss order.
and, on the other hand, in minor re-
actions In a major upward movement.
| a stock will frequently dip down to
the stop loss order figure and then
continue its upward movement after
| shaking out those who employed this
device.
Scale orders average, the use of puts
and calls. are other devices which
have been used by successful specu-
lators, but which used by others I'M
linked to sound individual judgment
| on market values leads but. to ulti-
mate loss.
More Plans to Come.
Irrespective of what critics may
say about the fallacy of mechanical
schemes for beating the market, the
production and sale Of them will con-
| tinue. There Is type of mind which
1 6nr1Q ndG them IF la ofVai1ov- 20 HA
search for perpetual motion ma
| chine.
In recent years, on the other hand.
| there has been very marked improve
| ment in the United States in the char
| acter Of business and financial sta
| tistics. Along with the development
| of factual material there has come a
new and better technique of express
ing these widespread data in simple
statistical tables and charts. Such
material which enables business men
| and spectators and investors to carry
| on their operations in line with facts
instead of on the basis OF guesswork
| is not to be confused with objection
able schemes which purport to elimi-
nate the need of individual discrfmi-
| nation. The new statistical data con-
stitute "judicious routine"-to use
the phrase suggested by Walter Bage-
hot. Much of the best material of
| this kind is prepared not by statistical
associations alone, which charge high
fees for their services, but by the
statistical departments Of banks which
are glad to send the results OF their
findings in monthly reports free Of
charge to those who are interested.
Among the best of these are the
monthly letters prepared by the Fed.
eral Reserve agents at the IL Federal
Reserve Banks throughout the coun-
try. each Of which will place on its
mailing list any individual who ex-
presses desire to get the material