SunTzu &The Art of War - The Army on the March
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Portfolio and Risk Management

The Army on the March (Marches)

More tactical commentary.

Respectful Preparation

"He who exercises no forethought but makes light of his opponents is sure to be captured by them."

Portfolio Management and Risk Management Corollaries:

Have a written strategic plan with very specific guidelines for money management, trade selection, risk control, and profit taking.

Be confident based on preparation, but not cocky based on unfounded and/or untested perceptions.

Suitability Of Strategies And Tactics To Situation

"Do not climb heights in order to fight."

"If you are anxious to fight, do not go to meet the invader near a river he has to cross. Instead, moor your craft higher up than the enemy, and facing the sun. Do not move upstream to meet the enemy. Our fleet must not be anchored below that of the enemy, for then they would be able to take advantage of the current and make short work of you."

"After crossing a river, get far away from it. When an invading force crosses a river in its onward march, do not advance to meet it in midstream. It will be best to let half the army get across, and then deliver your attack."

Portfolio Management and Risk Management Corollary:

Avoid struggling to get into a trade. Take only those high reward/low risk trades provided by the market. To do otherwise, will simply exhaust capital and other resources in fruitless trades, and leave you with insufficient wherewithal to capitalize on meaningful trade opportunities when they do appear.

Preserve And Protect Resources

"All armies prefer high ground to low, and sunny places to dark. Low ground is not only damp and unhealthy, but also disadvantageous for fighting. If you are careful of your men, and camp on hard ground, your army will be free from disease of every kind, and this will spell victory."

"When, in consequence of heavy rains up-country, a river which you wish to ford is swollen and flecked with foam, wait until it subsides. Country in which there are precipitous cliffs with torrents running between, deep natural hollows, confined places, tangled thickets, quagmires, and crevasses, should not be approached or else left with all possible speed."

"If in the neighborhood of your camp there should be any hilly country, ponds surrounded by aquatic grass, hollow basins filled with reeds, or woods with thick undergrowth, they must be carefully routed out and searched; for these are places where men in ambush or insidious spies are likely to be lurking."

Portfolio Management and Risk Management Corollary:

At all times, and especially when strategies are in play, seek to keep all resources in profitable and advantageous positions. Likewise, quickly liquidate unprofitable positions and minimize exposure to situations with inordinate risk to uncertain market movements.

Study, Observe, Remember, Compare, And Apply

"Movement among the trees of a forest shows that the enemy is advancing."

"The sudden rising of birds in their flight is the sign of an ambush at the spot below."

"When there is dust rising in a high column, it is the sign of chariots advancing; when the dust is low, and spread over a wide area, it betokens the approach of infantry. When it branches out in different directions, it show that parties have been sent to collect firewood. A few clouds of dust moving to and fro signify that the army is encamping."

"Humble words and increased preparations are signs that the enemy is about to advance. Violent language and driving forward as if to the attack are signs that he will retreat."

Portfolio Management and Risk Management Corollary:

Know the implications and importance of various market actions and rhetoric, and be prepared to react accordingly. "Profile" characteristics of each market traded. Constantly compare current conditions with market "profile".

Opportunistic Flexibility In Adapting Strategies And Tactics To Situation

"If the enemy sees an advantage to be gained and makes no effort to secure it, the soldiers are exhausted."

Portfolio Management and Risk Management Corollary:

If a market fails to continue to advance with bullish news, or fails to continue to decline with bearish news, be prepared to adapt strategy tactics accordingly.

Disciplined Organization

"...soldiers must be treated in the first instance with humanity, but kept under control by means of iron discipline."

"If, in training soldiers, commands are habitually enforced, the army will be well disciplined; if not, its discipline will be bad."

"If a general shows confidence in his men but always insists on his orders being obeyed, the gain will be mutual."

Portfolio Management and Risk Management Corollary:

Disciplined organization and utilization of all resources is critical to successful portfolio management and risk management.

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