The Psychology of Speculation. English-only reading by default; switch among English, Chinese, and Spanish, or compare languages side by side.
This chapter examines THE DANGERS OF INVERTED PYRAMIDS, using the author’s early-twentieth-century investment framework to explain how investors were expected to judge security quality, income, risk, and market conditions. It opens from the chapter’s own discussion: It was a wise custom of the ancients to build their pyramids with the big end on the ground; but modern builders of pyramids in the stock market have reversed this time-honored practice, and most of them build their stock pyramids with the heavy end up; therefore they invariably topple over after reaching a certain height. For example, when a certain stock known as Lake Copper was selling at $5 a share a trader bough
Readers studying financial history, investment education, and the chapter’s specific subject—pyramided, stop loss orders, trading on velvet—will get the most from this section. It is not suitable as a modern trading or investment checklist.
Read this chapter as historical investment education. The market rules, disclosure practices, securities, commissions, interest-rate conditions, and investor protections around pyramided, stop loss orders, trading on velvet may differ sharply from modern markets.