Henry Howard Harper wrote The Human Element in Stock Market Transactions in 1926. Since 1924, the Dow Industrials had risen 88%. The introduction reads, “Harper’s human behavior material gives us insights into handicapping prejudices that ruin our stock market theories and sound resolutions.”  Since then, securities laws have been enacted to make some actions illegal but somehow human nature tries to find ways around them.

We present a few selected stories for your consideration.


There is but one way to beat the stock market; there are many ways of being beaten by it


The sagacious financiers admit that the only sure way to make money trading in the stock market is to get in and out at opportune times and to stay out most of the time. Against this are numerous ways of losing money. One method is quite popular among a class of traders who, although too clever and conservative to buy stocks at “top” prices, do not have the patience to wait for “bottom” prices. When values begin to crumble after the top has been reached in a bull market there must be a set of “carriers” (or support), onto which stocks can be dumped on the way down. The market does not collapse like a ten-story house of cards; it generally goes down gradually for a while, one or two flights at a time and finds steadying thrusts every now and then, which sustain it for brief periods.

For instance, a stock paying $5 per share annually, has been hoisted by degrees from $75 to $150 a share. When it descends to $140 a few wise

traders who have been impatiently waiting for a the

reaction, will buy it because it looks cheap at $140 after having sold at $150; then at $130 another lot of traders who are a little wiser and more patient than

The first lot, buy because it looks much cheaper that it did even at $140; and so on down. The stock finds these temporary supports until eventually, it drops back to $75, or perhaps even lower. At that time, it is accumulated by a few shrewd investors and bargain hunters who’s attention has been attracted to the market by front page newspaper headlines, which announce that the stock market is in a state of complete prostration.

Those investors then go on about their business and pay no attention to the market until the price has recovered to appoint where the stock, returning $5 a share is no longer “paying its board.” Then, they sell out at a good profit and stay out while the speculators carry it on up as far as they like.

When the stock was at the bottom price, those who bought it on a scale from $140 down were either so overloaded or pessimistic—probably both—that they were unable to buy more and thus reduce their average to a reasonable cost.


Excerpts from The Pernicious

Influence of the Ticker Tape


    The individual who trades or invests in stocks will do well to keep away from the stock ticker; for the victim of “tickeritis” is no more capable of reasonable, self-composed action than one who is in the delirium of typhoid fever.

The gyroscopic action of prices recorded on the ticker-tape produces a sort of mental intoxication, which foreshortens the vision by involuntary submissiveness to momentary influences. It also produces on some minds an effect somewhat like  one might feel after standing for a considerable time, intently watching Niagara Falls. Dozens of people without any suicidal intentions, have been drawn into the current and dashed on the rocks below. Every day, thousands are influenced by the stock ticker to commit the most foolish blunders.

As a camera fails to record a true picture if placed too close in juxtaposition to the object, so in studying the ticker tape one is restricted close-up view of conditions, resulting in a distorted gauge of values. The figure recorded often misleads and confuses the attentive observer. In fact, it frequently happens that the price fluctuations result from a wave of hysteria among a coterie of traders and has but little analogy to the true value of the stocks.

To illustrate this point more explicitly, the stock of almost any conservatively capitalized and well managed concern paying $6 in annual dividends has an investment value from $85 to $100/share; but in the ups and downs of the market, the stock gets buffeted about on the exchange in response to the varying sentiments of traders, sometimes selling as low as $50, and at other times as high as $150, without any change whatever in the company’s earnings prospects, or its management. It does not follow that who keeps in touch with the stock market by telephone, or through daily papers, will find his path free from thorns and snares. But, he will at least have a more open perspective than one who submits to the influence of the ticker.

Any intelligent trader may reason out exactly what he ought to do under specific conditions; but in the quickly shifting and uncertain process of determining values, he loses his mental poise. Experience proves that anyone whose reasoning faculties become confounded is apt to be affected by some form of hysteria and will frequently do the opposite of what he would do under normal conditions.

The most unreliable financial writers are the market “tipsters,” who write daily letters of advice to an army of subscribers and claim to have positive knowledge of what certain stocks or groups of stocks are going to do marketwise. They often profess to have definite “inside information,” which any subscriber may receive at a stated price, ranging anywhere from $10/month and up. These false financial prophets, who lead a horde of blind followers, should not be confused with reputable bureaus and statistical experts who base their opinions and their advice to clients on a logical analysis of general conditions.

Henry Fielding wrote an essay to prove that a man can write more informingly on topics of which he has some knowledge than on matters that he knows nothing about. He also believed that mankind is more agreeably entertained by example than by law. Therefore, it is not the purpose of this discourse to teach anyone anything, unless of course, something may be gained by example or suggestion.

There are four subjects on which advice, is generally wasted: politics, stock speculation, religion, and love. In these matters adults rarely follow the advice of others and when they do (if they profit by it) they take all the credit themselves. If they lose, they always blame the advisor. These are the universal laws of human nature.

Still, hundreds of thousands of people continue to play at gambling tables and hundreds of thousands speculate in stocks. Since trading in stocks has the appearance of being an easy way of making money, it is one of the most alluring pursuits of modern times. This very fact, although legalized, is susceptible of becoming one of the most dangerous habits known. It is dangerous for the confirmed addict because he is apt to lose and it distracts his attention from his business in daytime and frequently destroys his rest at night.




There are four subjects on which advice, however good, is generally wasted:  politics, stock speculation, religion, and love; for in these matters adults rarely follow the advice of others.


Since it would be folly to advise people not to embark in commercial pursuits because statistics show that upwards of ninety per cent of business ventures result in failure, it would also be useless to caution people to not trade in stocks because it is a hazardous undertaking in which a peculiar sort of sagacity and self control are the only safeguards against certain disaster.

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, because optimists are inclined to back their hopeful views by indiscriminate purchases of stock at high prices. Pessimists are seldom disposed to back their views at all.

This leads us to conclude that in stock trading, all speculators, whether experienced or inexperienced, are subject to inscrutable laws of psychology which Nature herself seems to have designed for the discomfort of those who play at the wheel of fortune.



Gamesters and swindlers may play at Wall Street, but the game itself is as straight and legitimate as any business pursuit. As a matter of fact, it is one of the fairest and most open games ever played; a game in which every participant, man or woman, rich or poor, old or young, has an equal chance….




Many businessmen who should have learned from experience, still take the business situation as a guide to their stock market operations, although stock exchange history shows that the market turns up long before a period of business depression (recession) has run its course and likewise turns down six months or more before prosperity comes to a cause.

It is never safe to buy good stocks at figures well below their intrinsic worth. The element of gambling does not enter the picture until the market price has risen above the investment value. If the owner refuses to sell, or buys more (as the speculator usually does) he is gambling on the uncertain event that some individual or clique is going to pay him more than the stock is worth.


Speculators are Slaves of Sentiment

When the whole country becomes pervaded with an epidemic of bullishness the action of speculators is always directed by sentiment rather than judgment; and a market that is swept along be excited emotions is always dangerous…dangerous to go short and dangerous to be long of Hysterical “bulls” care nothing whatever about the earnings or dividend returns on a stock: the only note to which

they attune their actions is the optimistic slogan, “It’s going up!” And the higher it goes the more they buy, and the more their ranks are swelled by new recruits. A herd of stampeding cattle (cows no less than bulls) will rush blindly into a river, or butt their brains out against stone walls, trees or other obstructions; they also stampede every critter that happens along their path. Anyone who has ever witnessed a panic in a theater or auditorium, or in the stock market, need not to be told that under such circumstances men are only a little more sane than cattle.

Speaking of sentiment, it is remarkable to the extent the combined business and financial structures of the country are moved by this giant power. Like the biblical wind that blows, man hears the sound but knows not from where it comes or where it goes, sentiment springs up from comparatively insignificant or unknown sources. After playing havoc, it vanishes as suddenly and mysteriously as it came.

In a bear market, a train wreck, or the death of some financier, or an earthquake in Europe, will put the market off to the aggregate extent of hundreds of millions. However, one of the greatest bull markets in history found its chief impetus in the most universally devastating war the world has ever known.


In Conclusion

To sum up the situation, those who would make money speculating in the stock market should first understand that it requires as much caution and business acumen as any other money-making enterprise. It also helps to have some knowledge of the psychological handicaps. It also helps to be able to control one’s impulses, emotions and ambitions under the most heroic tests of human endurance.

All speculations, even the most conservative investments, have some slight element of risk. All lines of business are more or less a gamble; marriage is a gamble; political preferment is a gamble; in fact nearly everything in life, including our very existence is an uncertainly. However, people are not discouraged from entering into these ventures. Those who look only for certainties have far to search and little to find in this world.



Human nature influences all three areas of investments: the investor, the investment and the investing environment.

The three books below can help you get familiar with your emotions in the computer age.

In his book, Tape Reading and Market Tactics, (1931) Humphrey B. Neill suggests that a way to control your emotions is to have “an investment philosophy that considers fundamentals, technical action and market psychology.”

There are no good ways to curb your emotions but a solution to controlling them is to focus on the process and not the outcome, according to The Little Book of Behavioral Investing (2010) by James Montier

 In his book, Trading for a Living (1993), Alexander Elder suggests that if your emotions are causing losses and you want to control them, call Alcoholics Anonymous for their 12 steps to overcoming addictions.