ZF Capital

Speculators who “go broke” are usually those who fail to devote as much time to studying the subject of speculation as they devote to risking of an equal sum of money in their own business. These individuals will seldom admit that their ignorance is responsible for their losses. They prefer to accuse “Wall Street” and “bears” of having cheated them out of their money in some mysterious fashion. They fail to realize that no profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.

– Robert Rhea, The Dow Theory

The first thing a trader must learn is that his commitments should at all times be limited to an amount which he can, if fate decrees, afford to lose. A young speculator once told a veteran trader that his speculations were bothering him and that he could not sleep at night. The veteran’s advice was, “Reduce you line down to the sleeping point.”

– Robert Rhea, The Dow Theory

No one has ever given a satisfactory explanation of the obvious fact that many successful merchants, manufacturers, or hotel keepers will risk their earnings of years in stock speculation, a business about which they know nothing. These men almost invariably assume stock trading requires no knowledge or study, although they would not think of risking any considerable portion of capital in the expansion of their own business without most carefully canvassing the possibilities of the return to be earned on the funds so expended.

– Robert Rhea, The Dow Theory

Any person who tries to be in the market at all times is almost certain to lose money, for there are many periods when even the most skillful trader is in doubt as to what will happen. A wise man lets the market alone when the averages disagree.

– Robert Rhea, The Story of the Averages