Sun Tzu, was an ancient Chinese military general, strategist and philosopher who is traditionally believed to be the author of The Art of War, an influential ancient Chinese book on military strategy. Traditional accounts place him from c. 544–496 BC in the Spring and Autumn Period of China (722–481 BC) as a military general serving under King Helü of Wu. Sun Tzu’s art of war principles have been adopted by many traders who view markets similar to waging war, where both offense and defense play a role.
Below we take a look at a few of our favorite quotes from Sun Tzu’s Art of War disciplines and give our interpretation as they pertain to investing.
Sun Tzu - “know yourself and you will win all battles”
Interpretation – Understand your weaknesses as a trader and make sure you put in place plans to protect yourself from these weaknesses. For instance if you over trade set rules to limit your trading to x number of trades per week. If you are not disciplined on defense and often watch stocks fall without having a safety net in place, make a plan to employ stop losses as soon as you initiate the position.
Sun Tzu - “He who knows when he can fight and when he cannot, will be victorious.”
Interpretation - Sometimes it pays to trade and other times it doesn’t. Knowing when the environment is favorable versus not increase likelihood of success.
Sun Tzu – “Invincibility lies in the defense; the possibility of victory in the attack.”
Interpretation - While initially buying a stock holds a world of possibilities, it is proper risk management and playing solid defense that makes for long-term investing success.
Sun Tzu – “Ponder and deliberate before you make a move.”
Interpretation - Spending more time on pre-trade research and planning. Plan the trade, then trade the plan, and always be prepared. In investing looking before you leap makes more sense than leaping before you look.
Sun Tzu -“Even the finest sword plunged into salt water will eventually rust.”
Interpretation - Even the greatest stocks, the ones that have rewarded investors the most, will eventually turn into tomorrow’s losers.
Sun Tzu - “Water shapes its course according to the nature of the ground over which it flows”
Interpretation - Markets change and traders need, to be flexible and adapt to be successful.