Originally published in 1924, this short little book is a classic — well worth revisiting — and will later get a full review in its own right. (There is just something wonderful about old trading books.)
For now, though, the below passage is excellent — a classic demonstration of utilizing all the principles of the game.
Next in importance to knowing what to buy is the question as to when it should be done.
I was discussing this matter with an investor today. He referred to the assets and earning power of a big corporation whose securities had recently suffered a very material decline. He could not understand why the stock should go down in the face of such a showing of commercial and financial strength.
My answer was this:
“You have an automobile — it consists of a lot of steel, wood, rubber, brass, leather and other material. It requires gasoline, water, air and lubricating oil. Also knowledge as to how to adjust the whole piece of complicated machinery so that all the parts will work harmoniously. The smallest thing about your automobile is the spark. Without it the whole mass becomes junk. With the spark at least you can get the machinery to go, and you might plug along. But: Unless your spark is timed to fire at the exact moment when the piston reaches a certain point of elevation in the cylinder, you might as well get out and walk.
“It is the same way with the stock which you just mentioned. The company has ample working capital, high class management, big earning power, wonderful prospects. It is probably in a better and stronger position than when its stock sold thirty points higher. In this case the ‘spark’ is represented by the technical position. At 140 the spark was not properly adjusted. At 110 the adjustment has improved, but a study of the technical position of this stock will eventually point out the exact moment when it should be bought; so get all your other factors lined up ready for the first time when the technical position shows that it is time to buy.”