True experts are never deceived by illusions
(Sun Tzu's Art of War - Chapter on Reality and Illusion) begins by stating:
'The shape of the army resembles water; water flows according to the terrain, and the army wins according to the enemy.'
Sun Tzu emphasizes: in warfare, adapt to the situation, endless changes, true and false intertwine, making it impossible for the enemy to predict.
And the trading market is indeed a battleground of indistinguishable truth and falsehood.
Is it a real breakout or a false breakout?
Is the main force distributing or accumulating?
Emotional reversal or luring both long and short?
If you cannot distinguish between reality and illusion, you will surely fail in trading.
Understanding how to identify 'illusion' and strike 'reality' is the true skill of a trading expert.
1. The way of reality and illusion: attack when the enemy is unprepared, strike unexpectedly
Sun Tzu said:
'The skilled warrior makes it so that the enemy does not know what he is guarding; makes it so that the enemy does not know what he is attacking.'
'Attack when the enemy is unprepared, strike unexpectedly.'
Translated: Experts excel at creating 'illusions', hiding true intentions, luring the enemy into revealing weaknesses, and then delivering a fatal strike.
📈 In trading, this means:
The market often explodes in 'unprepared areas' (such as a counterattack after a false breakout)
The main force often uses feints (luring long/short) to entice retail investors to make mistakes
A real market movement always starts when most people dare not enter.
2. The shift between reality and illusion: the market is a game, truth and falsehood intertwine
Sun Tzu said:
'If I shape others and I am formless, then I focus while the enemy is divided; when I focus, the enemy will surely follow me.'
In trading, if you constantly reveal your strategy (frequent orders, chaotic stop-losses), we can easily be 'led by the nose' by the market.
True trading experts:
Unpredictable (only act in high win-rate patterns)
Hiding sharpness without revealing it (entering without being conspicuous, holding positions like still water)
When you strike, you must hit (only place orders when a real trend appears)
This is the market application of 'I am formless, the enemy is shaped.'
Trading practice: how to identify truth and falsehood?
1. How to identify 'false breakouts'?
Sun Tzu said: 'I shape others and I am formless', the main force's most commonly used 'shape' is false breakout. For example:
📉 Characteristics of a false upward breakout:
When breaking through key resistance levels, check if the lower timeframes show channel-like increases or three pushes forming
Immediately falls back to the original range after the breakout
Market sentiment suddenly turns extremely optimistic, experiencing 'explosive rise' followed by an immediate pullback
✅ Countermeasures:
Observe whether the closing of the real candlestick stabilizes at key levels
Look for continuity of momentum and whether the momentum is strong
Pay attention to whether the main force is 'luring and distributing', at this time you should observe or take counter actions
2. How to identify 'true starting'?
🚀 Characteristics of a true market movement:
Effective stabilization after breaking trend lines or moving averages
Volume increases, there is turnover, there is a relay, there are trend candlesticks
After the first wave of increase, if there is a volume decrease and a pullback without breaking support
✅ Countermeasures:
Immediately judge whether it is a 'real force' established
A decrease in volume and pullback to MA20 is the best entry point, forming 'the opportunity to attack the illusion'
3. Examples of trading traps involving 'illusion'
❌ Incorrect case: entering at high prices
The market just broke through key levels, the candlesticks are very strong, many people impulsively chase long.
Result: Quickly dropped back the next day, forming a false breakout.
This is a typical case of 'the market creating reality, hiding illusion within reality', making us mistakenly believe that the market is about to explode, but in fact it is a distribution trap.
The application of the reality and illusion chapter in trading strategies
✅ 1. Do not pre-judge, wait for confirmation (act only after confirming 'reality')
Do not predict whether the market will break out, only go long when the breakout is confirmed and stabilized
Do not gamble on bottom reversals, only trade at secondary confirmation points of the trend
✅ 2. Use 'false breakouts' to execute reverse strategies
Breakup failure → bearish
Breakdown failure → bullish
The technique of reality and illusion, winning through clarity of mind and sight
Sun Tzu said:
'If I shape others and I am formless, then I focus while the enemy is divided.'
➡️ In the market, if we can see through 'illusion' and wait for 'reality', you are the one controlling the rhythm.
The reality and illusion chapter does not teach us to act more, but rather teaches you to 'understand the situation'—
Use wisdom to defeat the enemy, not emotional trading.
