finance

Within the major movements of stock prices, there always are several minor movements, which are caused by various influences. One of the important causes is the technical condition of the market. Another cause might be called a psychological one. When stocks are moving up steadily in a bull market, people closely connected with the market expect a reaction and watch for it. The newspapers predict it. Consequently, there is sufficient let-up in buying to allow the pressure of selling by the bears to bring it about.

Technical conditions refer to the conditions that usually affect the supply and demand, such as short interests, floating supply, and stop loss orders.

It is sometimes said that supply and demand must be equal or else there could not be any sales, but that is not so. There are always some people who are willing to sell at some price above the market who will not sell at the market; and when the demand for stock is greater than the supply, it goes up until it is supplied by some of these people who are holding it at a higher price.

Stock prices are influenced largely by manipulation. Years ago when the volume of trading on the New York Stock Exchange was small compared with what it is today, it was possible to influence the entire market by manipulation, but it would be very difficult to do that today. It is only certain stocks that are manipulated; but if conditions are favorable, many other stocks may be influenced by them.

by J.J. Butler

Most people who trade in stocks buy on margin. The ordinary minimum margin is about 20% of the purchase price, because banks usually lend about 80% of the market value of stocks.

This book is written for the purpose of giving our clients some ideas of the fundamental principles that guide us when we select stocks for them to buy, but these principles are valuable to every person who trades in listed stocks or in any other kind of speculative stocks.

First of all, we want you to get a clear conception of the meaning of the word speculation, which is explained in the next chapter. Our purpose is to protect you against losses as well as to enable you to make profits, and it is very important that you understand how to provide for safety in your speculating.

By short selling, we mean selling a stock that you do not possess, with the intention of buying it later. Short selling in general business is very common, and we think nothing of it. Manufacturers frequently sell goods that are not yet made, to be delivered at some future time. Selling stocks short is a similar transaction, except that in a majority of cases delivery of the stock must be made immediately.

by Franklin Escher

Underlying the whole business of foreign exchange is the way in which obligations between creditors in one country and debtors in another have come to be settled—‌by having the creditor draw a draft directly upon the debtor or upon some bank designated by him. A merchant in New York has sold a bill of goods to a merchant in London, having thus become his creditor, say, for $5,000. To get his money, the merchant in New York will, in the great majority of cases, draw a sterling draft upon the debtor in London for a little over £1,000.

Turning now to consideration of the various sources from which springs the demand for foreign exchange, it appears that they can be divided about as follows:

1. The need for exchange with which to pay for imports of merchandise.

2. The need for exchange with which to pay for securities (American or foreign) purchased by us in Europe.