The Psychology of Speculation by Henry Howard Harper

The thought of becoming a stock "gambler" was farthest from this man's / mind; for gambling in any form was contrary to his code of ethics. But / buying and selling legitimate commodities could not be construed as / gambling; therefore stocks and bonds, being legitimate commodities, / could be bought and sold without doing violence to the most sensitive / conscience. In order to gamble, one must "risk or stake something on / an uncertain event; " which is popularly regarded as a vice, and is / made legally wrong because it is said to be injurious to the public / morals. It also is morally wrong to gamble, because if you win you / deprive your fellow-being of something without giving any adequate / return. Our friend contended that stocks bought at figures below their / intrinsic value are so sure to advance, that the transaction does not / come within the given definition of the word _gamble_; also that the / same rule applies to stocks sold at prices far above their worth, no / matter whether for long or short account. He reasoned that if he gained / by selling a stock short, although someone was apt to be the loser, he / had no means of knowing who that someone was, therefore he assumed no / moral responsibility in prudently acquiring money in a businesslike / way, even at the expense of some indefinite person who had been foolish / enough to risk it. If the act of selling stocks which one does not own / is regarded by some as being unethical in the strictest sense, it is / at least sanctioned by general custom. All sorts of goods are sold for / future delivery, even before they are manufactured; and our erstwhile / merchant had often sold leather for forward delivery, while it was / still in process of tanning; hence he had no scruples against selling / stocks in anticipation of being able to buy and deliver them later.

It is generally conceded that the public is always arrayed on the / "long" side (that is, the buying side) of the market; it is also / universally admitted, at least by those who know, that the so-called / "public" always bears the brunt of stock market losses; therefore our / friend decided that he would act the part of wisdom and go "short" of / the same number of shares that he had previously bought and sold, -- the / idea being that before selling his long stock he convinced himself that / approximately the top prices had been reached, in which case the market / would naturally react. But for some inexplicable reason it failed to / run true to his expectations; that is, the probable course deducible / from charts and precedents. Per contra, the prices continued stubbornly / to rise. When he had lost all his profits he backed his judgment by / his actions, and doubled his short sales; and at five points higher / he doubled again, for a break was long overdue. Being short upwards / of three thousand shares in a rapidly rising market is a tremendous / mental strain, even for a seasoned trader; and naturally our novice / became somewhat nervous. Some stock market wiseacre -- one or more of / which class are usually to be found lounging about every brokerage / office -- consolingly remarked that while stocks have a certain fixed / bottom, they have no top; which increased his anxiety.