From Griffith's translation:
"Lit. 'struggle' or 'contest' of the armies' as each strives to gain an advantageous position."
Disciplined Organization
"Without harmony in the state, no military expedition can be undertaken; without harmony in the army, no battle array can be formed."
"In war, the general receives his commands from the sovereign. Having collected an army and concentrated his forces, he must blend and harmonize the different elements thereof before pitching his camp"
Portfolio Management and Risk Management Corollary:
Again, disciplined, efficient, and effective organization and utilization of all resources (people, plans, tools, capital) is critical to leveraging portfolio management and risk management success.
Opportunistic Flexibility In Adapting Strategies And Tactics To Situation
"After that comes tactical maneuvering, and there is nothing more difficult. The difficulty consists in turning the devious into the direct, and misfortune into gain."
Portfolio Management and Risk Management Corollaries:
Use option oriented strategies (indirect) to establish positions that can be converted to outright long or short positions in the underlying (direct) as the market reveals itself.
The way to capitalize on the endless opportunities created by ever-changing market conditions, is to become engaged as a part of a well thought out portfolio management and risk management plan and be flexible in adapting strategies and tactics to conditions within the context of the plan.
Inherent Advantages And Disadvantages
"Maneuvering with an army is advantageous; with an undisciplined multitude, most dangerous."
From Griffith's translation:
"...This too literal translation completely misses the point. Ts'ao Ts'ao's interpretation is surely more satisfactory. The verse is a generalization which introduces what follows. A course of action which may appear advantageous usually contains within itself the seeds of disadvantage. The converse is also true."
Portfolio Management and Risk Management Corollaries:
And again, disciplined, efficient, and effective organization and utilization of all resources (people, plans, tools, capital) is critical to leveraging portfolio management and trading success.
Regardless of how promising a market situation appears, always establish protective loss measures. Also, regardless of how bleak a position appears, always be prepared to act on an unexpected advantage afforded by the market.
Timing
"If you set a fully equipped army to march in order to snatch an advantage, the chances are that you will be too late."
Portfolio Management and Risk Management Corollary:
Again, avoid "chasing" a market to get in.
Proper Support
"On the other hand, to detach a flying column for the purpose (to snatch an advantage) involves the sacrifice of its baggage and stores."
"An army without its baggage train is lost; without provisions it is lost; without bases of supply it is lost."
Portfolio Management and Risk Management Corollary:
Preserve capital through proper support, prudent strategy and tactic selection, and adherence to prudent money management principles.
Relationship Management
"We cannot enter into alliances until we are acquainted with the designs of our neighbors."
Portfolio Management and Risk Management Corollary:
Just as we need to know ourselves and the markets we trade in order to succeed, we need to know all trading partners we align with.
Develop Knowledge Through Study
"We are not fit to lead an army on the march unless we are familiar with the face of the country--its mountains and forests, its pitfalls and precipices, its marshes and swamps."
"We shall be unable to turn natural advantages to account unless we make use of local guides."
Portfolio Management and Risk Management Corollaries:
Be thoroughly informed, both technically and fundamentally, of all major information elements that influence the decision making processes of the participants in each market being traded.
Systematically organize the information in a form that facilitates timely decision making and implementation, as opposed to inhibiting it.
Trading on "inside" information is illegal. However, by adhering to the two foregoing points, we can create "local guides" out of how we process and organize market related information.
Develop thought of overlaying significant points of fundamental information on swing charts.
Deception And "Shaping"
"In war, practice dissimulation and you will succeed."
"Let your plans be dark and impenetrable as night"
"He will conquer who has learned the artifice of deviation."
Passive Portfolio Management and Risk Management Corollary:
Keep your strategies and tactics to yourself. Allow them to become apparent only when results have been secured.
Active Portfolio Management and Risk Management Corollary:
When possible, establish multi-faceted option positions to enable flexibility in adapting to evolving market conditions.
Mirror Portfolio Management and Risk Management Corollary:
Given our limited ability to deceive the markets and the markets seeming unlimited ability to deceive us, be prepared against being deceived by the opposition by being as fully informed of their characteristics and positions as is possible.
Strategic Planning
"Ponder and deliberate before you make a move."
Portfolio Management and Risk Management Corollary:
Have a written strategic plan with very specific guidelines for money management, trade selection, risk control, and profit taking.
Timely Implementation
"Move only if there is a real advantage to be gained."
"...when you move, fall like a thunderbolt."
Portfolio Management and Risk Management Corollary:
Once an opportunity has been identified, a strategy has been selected, and tactics have been decided on, implement promptly and without hesitation.
Opportunistic Flexibility In Adapting Strategies And Tactics To Situation
"Whether to concentrate or to divide your troops must be decided by circumstances."
Portfolio Management and Risk Management Corollaries:
Again, maintain a strategic focus at all times, regardless of the circumstances.
Again, the way to capitalize on the endless opportunities created by ever-changing market conditions, is to become engaged as a part of a well thought out portfolio management and risk management plan and be flexible in adapting to conditions within the context of the plan. In so doing you will become a part of the markets' energy flow and, thereby, continually improve your ability to successfully interact with market forces.
Reward, Replenish, Invest
"When you plunder a countryside, let the spoil be divided among your men; when you capture new territory, cut it up into allotments for the benefit of the soldiery."
Portfolio Management and Risk Management Corollaries:
Replenish, and perhaps grow, liquidity account.
Increase longer term diversified investment portfolio.
Reward associates.
Replenish spiritual, emotional, mental, and physical reserves.
Invest in up-grading portfolio management and risk management support structure.
Organizational Management
"On the field of battle, the spoken word does not carry far enough; hence the institution of gongs and drums. Nor can ordinary objects be seen clearly enough; hence the institution of banners and flags. Gongs and drums, banners and flags, are means whereby the ears and eyes of the host may be focused on one particular point. The host thus forming a single united body, it is impossible either for the brave to advance alone, or for the cowardly to retreat alone."
Portfolio Management and Risk Management Corollaries:
Have a written plan and very specific guidelines for money management, trade selection, and profit taking.
Ensure that every member of the portfolio management and risk management unit clearly understands what is to be done.
Discipline, efficient and effective organization, communication, and utilization of all resources (people, plans, tools, capital) is critical to leveraging portfolio management and risk management success.
Planning, Patience, Timing
"Now a soldier's spirit is keenest in the morning; by noonday it has begun to flag; and in the evening, his mind is bent only on returning to camp. A clever general, therefore, avoids an army when its spirit is keen, but attacks it when it is sluggish and inclined to return. This is the art of studying moods."
"Disciplined and calm, he awaits the appearance of disorder and hubbub among the enemy. This is the art of retaining self-possession."
"To be near the goal while the enemy is still far from it, to wait at ease while the enemy is toiling and struggling, to be well fed while the enemy is famished--this is the art of husbanding one's strength."
"To refrain from intercepting an enemy whose banners are in perfect order, to refrain from attacking an army drawn up in calm and confident array--this is the art of studying circumstances."
"It is a military axiom not to advance uphill against the enemy, nor to oppose him when he comes downhill."
Portfolio Management and Risk Management Corollaries:
Have a well organized strategy, the patience to wait for the markets to provide a qualifying high reward/low risk trade, and the discipline to execute again and again.
Through planning, patience, and our "superior force" of focused knowledge and experience, select and implement strategies and tactics suitable to the opportunities provided by the market phase, pattern, and volatility. In so doing, will avoid getting crosswise of the markets' strength.
Preserve capital through adherence to prudent money management principles, so that when a mistake is made the financial consequence will be small.
Avoidance Of Being Deceived And "Shaped"
"Do not pursue an enemy who simulates flight; do not attack soldiers whose tempers are keen. Do not swallow a bait offered by the enemy."
Portfolio Management and Risk Management Corollary:
Actively take preventative measures to thwart the opposing participants' ability to entice and deceive you into implementing inappropriate strategies and tactics.
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