In (The Art of War), Sun Tzu begins by saying:
"War is a matter of state, a matter of life and death, a path to survival or extinction, it must not be ignored."
In our current language, it is:
War is a major matter of life and death for a nation and must not be taken lightly; it must be investigated thoroughly.
What does this have to do with trading? In fact, it is very relevant. 💪
In the market, trading is our 'battlefield'.
And we, as traders, are like generals——
Every order placed is like deploying troops;
Every take profit and stop loss is a switch between offense and defense.
In war, one must consider terrain, weather, and the strength of both sides;
In trading, we need to consider trend direction, key levels, market structure, time cycles, signals, and risk management.
Sun Tzu said war 'must not be ignored',
Trading, for us, is also 'not to be ignored'.
As long as we view trading as a war,
We will naturally understand: acting without a plan is a path to destruction.
So, how does Sun Tzu teach us to 'observe'?
He summarized five core factors that must be considered:
Firstly, the Way; secondly, Heaven; thirdly, Earth; fourthly, the General; fifthly, the Law.
Trading is war; traders are generals.
So the next question becomes very important——
As 'generals', what do we need to consider to win a battle?
Sun Tzu said, in war one cannot rely on feelings, nor can one act recklessly.
We must assess and plan from five perspectives, which are:
Way, Heaven, Earth, General, Law.
Thus, evaluate with five matters, calculate and seek the truth.
This sentence means:
Use these five matters to assess the situation, compare both sides, and then infer the real situation.
This is like our preparatory work before trading:
Study market trends;
Mastering time cycles;
Draw key support levels;
Overcoming psychological barriers;
Machine execution system;
So we can remember the framework of the 'five matters' this way:
Five matters = Five-dimensional analysis model before trading
Way: The hearts of the people align with the commander vs. recognizing one's own trading philosophy and system, following the trend.
Heaven: Timing, seasons, climate vs. our grasp of market rhythm and time cycles
Location: Terrain, distance, danger vs. changes in market structure and familiarity with entry positions and support/resistance levels
General: The qualities of the commander vs. the trader's own psychology and execution (not greedy, not fearful, not manually closing positions after opening, not trading frequently)
Law: Military system, rules VS strictly following trading system and risk control system
What are the common mistakes people make in actual trading?
Only looking at candlesticks, not the trend structure;
When emotions run high, even the fundamentals are ignored;
A stop loss is set in the system, but it is changed with a shaky hand;
Having a strategy but completely lacking faith, only wanting to chase after a rise.
Ultimately, it is because they failed to 'evaluate with calculations and seek the truth'——
In other words, not using the 'five matters' to evaluate the market and oneself.
Practical tip:
Starting today, we can try to do this:
Before each trade, quickly ask yourself five questions:
Way: Do I agree with this strategy? Can I stick to it?
Heaven: Is the current market state suitable for trading? Is the sentiment extreme?
Location: Is the current position a key support/resistance zone? Or a consolidation area?
Ask: Am I emotionally stable today? Will I be influenced by the previous trade?
Law: Is my plan complete? Have I set stop loss, take profit, and position size?
We will find that many trades we would originally have lost will not happen at all after these five questions.
Traders are not gamblers, but strategists.
Learning military strategy is not for appreciating ancient texts,
But to help us in the real trading market,
Build our own 'strategic system' to give ourselves a chance to survive in the market.
