till lower before
it would go higher, and that did not involve any risk for those who knew
they could hold them. The fact that the market prices of Liberty Bonds
would advance was based upon an economic law that never fails. That law
is that when interest rates go up, the market prices of bonds go down,
and when interest rates go down, the market prices of bonds go up. When
Liberty Bonds were selling in the 80's, interest rates were so very
high, it was certain that they would come down. That the market prices
of Liberty Bonds would go up was also certain, but nobody could tell how
much they would go up in a given time. It was that element of
uncertainty that made them speculative, and not that there was any doubt
about the fact that the market prices of them would go up. Buying
Liberty Bonds at that time was speculating with safety. If you read this
book with understanding, you will know much about speculating with
safety.

CHAPTER III.

SOME TERMS EXPLAINED

There are certain terms used in connection with stock speculation that
are very familiar to those who come in contact with stock brokers, and
yet are not always familiar to those who do business by mail.
Undoubtedly the majority of our readers are familiar with these terms,
but we give these definitions for the benefit of the few who are not
familiar with them.

Trader: A person who buys and sells stocks is usually referred to as a
trader. The word probably originated when it was customary to trade one
stock for another and later was used to refer to a person who sold one
stock and bought another. He was a trader; but the person who buys
stocks for a profit and sells them and takes his profit when he gets an
opportunity, may not be a trader in the strict sense of the word.
However, for convenience, we use the word "trader" in this book to refer
to any one who buys or sells stocks.

Speculator: This word refers to a person who buys stocks for profit,
with the expectation of selling at a higher price, without reference to
the earnings of the stock. He may sell first, with the expectation of
buying at a lower price, as explained in Chapter XVII. on "Short
Selling." In many cases where we use the word "trader," it would be more
correct to use the word "speculator."

Investor: An investor differs from a speculator in the fact that he buys
stocks or bonds with the expectation of holding them for some time for
the income to be derived from them, without r