The Art of War is an ancient Chinese military treatise attributed to Sun Tzu, a high-ranking military general, strategist and tactician. It has had an influence on Eastern and Western military thinking, business tactics, legal strategy and beyond.
Sun Tzu’s military scrolls
Let’s me give you some ideas about the wisdom of Sun Tzu with regards to his writing ‘The Art of War’ before I give you some examples why it is also so relevant to the trading and investing world.
Sun Tzu said: The art of war is of vital importance to the State.
It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.
The art of war, then, is governed by five constant factors, to be taken into account in one's deliberations, when seeking to determine the conditions prevailing in the field. These are:
(1) The Moral Law;
(4) The Commander, and
(5) Method and discipline.
Now, allows me to provide a close analogy of Sun Tzu’s factors to the hostile trading and investing environment.
- The moral law (behaviour, attitude, spiritual) – same things needed in trading/investing environment.
- Heaven & Earth (weather/terrain)– market conditions and market sentiments
- The Commander (controller/executor) – Your wisdom, skills, emotional toughness and the deployment of your capitals (capital is likened your soldier). You must have a good management of your money (soldiers) with good risk control.
- Methods and Discipline (Strategies and tactics)
Today, I also want to ask you to stay away from trading and investing if you are not prepared to study, understand and apply the 5 factors seriously.
Those who want to know more about these 5 factors should ask for a copy of my upcoming new book titled ‘Explosive Secrets of a Millionaire Trader- Hidden Money Momentum Methodology’ when it is available on my website.
Distribution Curve for Stock market winners and losers
Why is about 80% of the traders and ordinary investors losing money in the end?
From my 20 years of exposure and experience in hostile financial market environment, I can tell you that ‘trading or investing’ is not easy and it is quite similar to a merciless ‘battle ground’. It is a survival game! Only the fittest survive in a trading ‘battle ground ‘and you have to know that you are competing or fighting against the best traders or investors (with the sharpest mind) in the world.
The worst thing is that 80% of the traders and investors never understand the basic principle and the value of the ‘Cycle Timing’ which tells us that ‘there is a better or easier time for stock traders/investors to make good killings in the battle ground but there is also a time for you to easily get burnt to ashes. You must know when (based on timing and market condition) to withdraw from the battle ground completely.
I believe greater safety and superior gains result from the willingness to leave stocks and the stock market from time to time. Sun Tzu said that you must master the ‘heaven and earth’ (weather, terrain, timing) before a complete victory is ensured, and he who knows when he can fight and when he cannot will be victorious. In other words – TIMING!
So, if you do not wish to be part of the 80% losers, you must also adopt what Napoleon Hill said are ‘the 3 P’ attributes - Patience, Persistence and Perspiration make an unbeatable combination for success.
Perhaps, I can add another ‘P’ here which is ‘Passion’ in what you do. ‘Passion’ can be the driving force of ‘the 3 P’.
The battle of WATERLOO
Why did the great Napoleon lose the battle? It is all about environmental conditions (weather, terrain) and timing (time finally arrived for the rain to make the ground soggy). Napoleon believed that Waterloo was going to be a quick and easily winnable battle. The Emperor had fought all over Europe and defeated almost everyone but he had never faced Wellington and did not know what the Iron Duke was capable of. Despite not knowing what his adversary was capable of he held Wellington in contempt and believed he could just sweep the British commander away and march on Brussels with little effort. But the rain came and Wellington’s troops were used to fighting in or after the rain, and Napoleon’s troops were not. Furthermore, Wellington placed his troops on top of the central hill, so that Napoleon had to fight uphill!
Political battle is also very brutal, just like any war. In fact, it is all the same if you take the word ‘survival’ into deep consideration for any kind of business – be it marketing, trading or investing.
Two nights ago, in the leadership spill and challenge in Australia parliament, I already knew who had won the battle, even before all politicians casted their dirty votes. It was a very simple guess -Julia Gillard gave the victory to Kevin Rudd because she fell on her own sword.
The voting result of 57 to 45 against her was a clear indication that Kevin Rudd did not win the battle outright. But ’win is win’ no matter how you look at it. Since 3 months ago till 5pm of the last evening, Gillard did not realise that her own strength (I am not just talking support from her usual loyalists here) was diminishing in a big way and she was also not fully aware of what her enemy’s intention and plan were.
It is also interesting to note what Sydney Morning Herald columnist Paul Sheehan has said: “With time to reflect, she will see her political demise as a mercy killing. Her condition had been diabolical. She had become the issue. She had become the liability.” She self-destructed herself to enable Kevin Rudd to win back the prime-ministership even before it is ever fought.
All the above stories fit well into what Sun Tzu’s said:
Know thy self, know thy enemy. A thousand battles, a thousand victories.
He who knows when he can fight and when he cannot will be victorious. (TIMING)
‘If you know heaven and know earth, you may make victory complete’ (MARKET CONDITIONS)
About the investing and trading in any financial markets with Sun Tzu’s strategies and tactics.
In order to become one of the fittest and survive in any financial markets ( Wall St, Gold, Silver, USD etc), you need to understand and apply the principles of Sun Tzu’s Art of War. I strongly recommend you read the Sun Tzu’s book and watch the Chinese movies called ’Sun Tzu’s 36 Military Strategies’, ‘The Battle of Redcliff’ or ‘Three Kingdoms’, which may give you a new dimension in trading and investing.
To be successful in trading and making money, you must apply the following 3 types of analysis (methods) together in harmonic ways. These 3 types of analyses (methods) form the foundation of success in a trading war but good methods are not complete without the effective execution of the strategies, tactics, awareness of market conditions, timing and excellent personal discipline management.
I do not really understand the principles and application of Sun Tzu’s ‘The Art of War’ till I lost a lot of money in trading and investing. Let’s me give you a bit of ideas about my 4 fundamental principles of trading and investing, which I believe are in line with some of the principles spelt out in the ‘The Art Of War’ written by one of the greatest military strategist in the history of mankind.
- Fundamental analysis – you got to know what is happening in the world economy- the past, the present and the future (leads from the past and present to see the future). You got to read and analyse all the time-nonstop. But of course, you got to know where to read the good stuff as most of them are rubbish or noises that may bring you distraction and confusion. (methods and analyse economic and market conditions)
- Technical analysis – You must know the trend direction/trend lines and support/resistance. When the trend is up, you must focus on LONG trade and if we trade against it, we are inviting trouble. So, we must be perfectly clear with the trend direction. We flow with the wave to save energy. Use simple Technical analysis so that you won’t get confused. ( Methods - Strategies and Tactics)
- Timing Cycle Analysis- Pay attention to all cycles irrespective of the time frame -short term, medium and a long term if you want to make money consistently. As I always say, nothing goes up in straight line and there is a time to buy and a time to sell. Sometimes just timing alone (detect market conditions) can decide your fate (alive or death) in trading and investing (just like the Battle Of Waterloo)- Timing and market conditions.
- Market conditions and Sentiments. You got to know whether it is a bullish, bearish, stable or uncertain market. You got to know the market sentiments based on the behaviours of the traders and investors – rational or irrational etc.
IN A NUTSHELL – IF YOU WANT TO MAKE MONEY CONSISTENTLY AND BE IN THE ‘20% WINNERS CATEGORY’:
- You must have effective methods – I am using a few effective proven methods over the years ( read a bit more from my website)
- You must have top strategies and tactics ( read a bit more from my website)
- You must a very knowledge of the market conditions and sentiments and market timing…I use Gann’s master time factor etc to predict correctly the peak of Gold ($1921) in 2011 and subsequent correction and crash in April 2013 and during the crash, I even said that it would go lower. ( read a bit more from my website)
- You must have 100% discipline which involves perspiration, patience and perseverance with some flexibility at times.
Last but not the least-YOU MAY SAY THAT YOU WANT TO INVEST & TRADE BUT YOU DON’T HAVE TIME TO LEARN. That is true because not everybody can do the same thing. I strongly suggest that you get reliable and honest financial advisors to do it for you. But I need to remind you that there are not many good ones in the market.
Some other SUN TZU’S QUOTES
- ‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.’ (STRATEGIES/TACTICS)
- ‘The general who loses a battle makes but few calculations beforehand. Thus doing many calculations lead to victory and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose. (METHODS, PLANS & STRATEGIES)
- Management of many is the same as management of few. It is a matter of organization. (PLAN)