Wednesday, April 28, 2010

Sun Tzu and the Art of Trading

One of the most popular metaphors for trading is that it is like war. And one of the most famous military strategists was the ancient Chinese general, Sun Tzu. His work, The Art of War has become as much a staple at business schools as in military colleges.

If you haven't read this, you owe it to yourself. The whole thing is available online, for example at:

For a quick Reader's Digest condensed version of some of his more well-known quotes, you might check out:

Here's one I like:

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

The parallels to trading are obvious and the lessons are just as true.

Here's another good one:

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

When you trade, you are the general in command of your own army. Every dollar in your trading account is a soldier. The enemy is all around. I've found over the past two years that by learning to lead my troops more wisely I've come to achieve more victories and fewer defeats. And I owe a debt of thanks to Sun Tzu.

Market update: I'm looking for a rebound tomorrow. It may not hold, but I went long ES at 1182.50 at 1:39 AM. We'll see where it is in the morning.

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