The Art of War “Sun Tzu” Variasi Tactics
The Nine Variables
Catastrophic Loss Avoidance
"There are roads that must not be followed, towns that must not be besieged."
"There are armies that must not be attacked, positions that must not be contested, commands of the sovereign that must not be obeyed."
Portfolio Management and Risk Management Corollary
There are times when it is best to be neutral, ie, have no market positions. This is especially true when the only trades available are of the high risk/low reward variety.
"The general who thoroughly understands the advantages that accompany variation of tactics knows how to handle his troops. The general who does not understand these may be well acquainted with the configuration of the country, yet he will not be able to turn his knowledge to practical account."
Portfolio Management and Risk Management Corollaries
Adjust the tactical implementation of each strategy to contemporary market conditions (phase, section, pattern, swing level, and volatility).
In addition to being well educated and informed regarding markets, current conditions, and strategy, the successful portfolio manager and risk manager also needs the psychological capacity and discipline to adapt his implementation tactics.
Inherent Advantages And Disadvantages
"In the wise leader's plans, considerations of advantage and of disadvantage will be blended together. If our expectation of advantage be tempered in this way, we may succeed in accomplishing the essential part of our schemes. If, on the other hand, in the midst of difficulties we are always ready to seize an advantage, we may extricate ourselves from misfortune."
Portfolio Management and Risk Management Corollaries
In every advantageous situation, there is an inherent potential disadvantage. Identify the potential disadvantage, establish precautions against it, all the while, continue to pursue the advantage.
In every disadvantageous situation, there is an inherent potential for an advantage to develop. Be constantly alert to capitalizing on potential advantages, as and when they appear, to diminish and/or eliminate losses.
Rely On Own Preparation
"The art of war teaches us to rely not on the likelihood of the enemy's not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable."
Portfolio Management and Risk Management Corollary
Never construct and implement a strategy based on hope or fear of what the market may do. Always endeavor to base actions on knowledge, principles, planned strategies, and acceptable tactical adjustments.
Competent Management
"There are five dangerous faults that may affect a general, of which the first two are: recklessness, which leads to destruction; and cowardice, which leads to capture.
Next there is delicacy of honor, which is sensitive to shame; and a hasty temper, which can be provoked by insults.
The last of such faults is oversolicitude for his men, which exposes him to worry and trouble, for in the long run the troops will suffer more from the defeat, or at best, the prolongation of the war, which will be the consequence."
Portfolio Management and Risk Management Corollaries
Avoid recklessness by engaging the markets only within the context of a well thought out portfolio management and risk management plan.
Once a strategy has been developed, tested and selected, be bold in implementation.
While always adhering to the Moral Law, also, always be flexible and opportunistic in capitalizing on opportunities provided by changing market conditions.
In stressful situations, minimize the inclination to make emotional decisions.
Also, regardless of the planning that has gone into developing and testing a strategy, there will often times be some adversity, usually financial losses, encountered in implementation. Be prepared to view the adversity as simply another part of doing business, by adapting strategy and tactics to market conditions, thereby keeping the financial losses small.
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