Speculation As A Fine Art is written by Dickson G. Watts and can be consider as one of the first book on speculations. Reminiscences of a Stock Operator the book about Jesse Livermore written by Edwin Lefèvre constantly references Speculation As A Fine Art
In his book Dickson G. Watts describes “Laws Absolute” that are valid today as much as they were hundred years ago.
1. Never Overtrade.
To take an interest larger than the capital justifies is to invite disaster. With such an interest a fluctuation in the market unnerves the operator, and his judgment becomes worthless.
2. Never “Double Up”;
that is, never completely and at once reverse a position. Being “long,” for instance, do not “sell out” and go as much “short.” This may occasionally succeed, but is very hazardous, for should the market begin again to advance, the mind reverts to its original opinion and the speculator “covers up” and “goes long” again. Should this last change be wrong, complete demoralization ensues. The change in the original position should have been made moderately, cautiously, thus keeping the judgment clear and preserving the balance of the mind.
3. “Run Quickly,”
or not at all; that is to say, act promptly at the first approach of danger, but failing to do this until others see the danger, hold on or close out part of the “interest.”
4. When doubtful, reduce the amount of the interest;
for either the mind is not satisfied with the position taken, or the interest is too large for safety. One man told another that he could not sleep on account of his position in the market; his friend judiciously and laconically replied: “Sell down to a sleeping point.”