More tactical commentary.
Suitability Of Strategies And Tactics To Situation
"That the impact of your army may be like a grindstone dashed against an egg, use the science of weak points and strong."
"You may advance and be absolutely irresistible if you make for the enemy's weak points; you may retire and be safe from pursuit if your movements are more rapid than those of the enemy."
"An army may march great distances without distress if it marches through country where the enemy is not. You can be sure of succeeding in your attacks if you only attack places that are undefended. You can ensure the safety of your defense if you only hold positions that cannot be attacked. That general is skillful in attack whose opponent does not know what to defend; and he is skillful in defense whose opponent does not know what to attack."
Portfolio Management and Risk Management Corollaries:
Thoroughly know the characteristics of each market being traded. Judiciously apply resources by selecting and implementing those strategies that are suitable to the market's phase, section, pattern, swing level, and volatility.
Likewise, avoid getting the bias of the position cross-wise with the market's price and volatility bias.
Be quick to minimize losses if strategy proves to be unsuitable to phase, pattern, or volatility.
Timing
"Whoever is first in the field and awaits the coming of the enemy will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted."
Portfolio Management and Risk Management Corollaries:
Attempt to position, prior to a break, with option spreads and/or pre-established orders to enter based on confirmation.
Avoid "chasing" a market to get in.
Avoidance Of Being Deceived And "Shaped"
"Therefore the clever combatant imposes his will on the enemy, but does not allow the enemy's will to be imposed on him."
Portfolio Management and Risk Management Corollary:
Again, the individual portfolio manager and risk manager has severely limited, if any, ability to impose his will on the opposing traders.
Mirror Portfolio Management and Risk Management Corollary:
The key is to actively take preventative measures to thwart the opposing participants' ability to entice and deceive you into implementing inappropriate strategies, and in so doing, imposing their will on you.
Maintain An "Edge" Through Focused Knowledge And Experience
"By discovering the enemy's dispositions and remaining invisible ourselves, we can keep our forces concentrated, while the enemy's must be divided."
"Hence there will be a whole pitted against separate parts of a whole, which means that we shall be many to the enemy's few. And if we are able thus to attack an inferior force with a superior one, our opponents will be in dire straits."
"Numerical weakness comes from having to prepare against possible attacks; numerical strength from compelling our adversary to make these preparations against us."
"Though the enemy be stronger in numbers, we may prevent him from fighting. Scheme so as to discover his plans and the likelihood of their success. Rouse him, and learn the principle of his activity or inactivity. Force him to reveal himself, so as to find out his vulnerable spots. Carefully compare the opposing army with your own, so that you may know where strength is superabundant and where it is deficient."
Portfolio Management and Risk Management Corollaries:
Thoroughly analyze market conditions and categorize (profile) its characteristics.
Preserve capital through adherence to prudent money management principles.
Through 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, section, pattern, swing level, and volatility.
Opportunistic Flexibility In Adapting Strategies And Tactics To Situation
"What the multitude cannot comprehend is how victory may be produced for them out of the enemy's own tactics."
"All men can see the individual tactics necessary to conquer, but almost no one can see the strategy out of which total victory is evolved."
"Military tactics are like unto water; for water in its natural course runs away from high places and hastens downward. So in war, the way is to avoid what is strong and to strike at what is weak. Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing."
"Therefore, just as water retains no constant shape, so in warfare there are no constant conditions...He who can modify his tactics in relation to his opponent, and thereby succeed inwinning, may be called a heaven-born captain."
From Griffith's commentary on Sun Tzu On War:
"Sun Tzu's theory of adaptability to existing situations is an important aspect of his thought. Just as water adapts itself to the conformation of the ground, so in war one must be flexible; he must often adapt his tactics to the enemy situation. This is not in any sense a passive concept, for if the enemy is given enough rope he will frequently hang himself. Under certain conditions one yields a city, sacrifices a portion of his force, or gives up ground in order to gain a more valuable objective. Such yielding therefore masks a deeper purpose, and is but another aspect of the intellectual pliancy which distinguishes the expert in war."
Portfolio Management and Risk Management Corollaries:
Maintain a strategic focus at all times, regardless of the circumstances.
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 trading plan and be flexible in adapting to conditions within the context of the plan. In so doing we will become a part of the markets' energy flow and, thereby, continually improve our ability to successfully understand and utilize market conditions to our advantage.
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