The Psychology of Speculation by Henry Howard Harper

An enormous percentage of stock market speculators become victims of / over-confidence after a series of successful trades. Their buoyant / spirits increase with every new success, until at length they throw / discretion to the winds, extend their risks far beyond the margin of / safety, and at the infallible turn of the market they find themselves / in difficulty, like foolish fishes that get stranded on the beach at / high tide. It is a fact, as inexplicable as it is true, that men with / a fair amount of gray matter in their heads, who would flout the idea / of paying $50 a share for a particular stock, will later borrow money / from a broker at from six to eight per cent. to buy the same stock all / the way up from $100 to $150 a share on the slenderest permissible / margin; and, instead of proportioning the margin of safety to the / increased carrying risk they narrow it by continuing to buy as the / prices advance. Also there are many who after selling their stocks / at a handsome profit will buy them back at twenty, fifty, eighty, or / a hundred points higher, and with much less timidity than they felt / when they first bought them at low figures. Prosperity in the stock / market seems to encourage optimism, rashness and impatience in about / the same degree that adversity discourages enterprise and aspiration. / But there is far greater danger in excessive optimism than in excessive / pessimism, for the reason that optimists are inclined to back their / hopeful views by indiscriminate purchases of stocks at high prices, / while pessimists are seldom disposed to back their views at all. The / risks incurred in buying stocks on a "thin" margin are so manifest that / it seems almost as platitudinous to mention them as it would be to / remark that children endanger their lives when they congregate on thin / ice.