- Trading
- Trading
- Markets
- Markets
- Products
- Forex
- Commodities
- Metals
- Indices
- Shares
- Cryptocurrencies
- Treasuries
- ETFs
- Accounts
- Accounts
- Compare our accounts
- Our spreads
- Funding & withdrawals
- Open account
- Try free demo
- Platforms & tools
- Platforms & tools
- Platforms
- Platforms
- Platforms overview
- MetaTrader 4
- MetaTrader 5
- Mobile trading platforms
- Premium trading tools
- Premium trading tools
- Tools overview
- VPS
- Genesis
- Education
- Education
- Resources
- Resources
- News & analysis
- Education hub
- Economic calendar
- Earnings announcements
- Help & support
- Help & support
- About
- About
- About GO Markets
- Our awards
- Sponsorships
- Client support
- Client support
- Contact us
- FAQs
- Quick support
- Holiday trading hours
- Fraud and scam awareness
- Legal documents
- Trading
- Trading
- Markets
- Markets
- Products
- Forex
- Commodities
- Metals
- Indices
- Shares
- Cryptocurrencies
- Treasuries
- ETFs
- Accounts
- Accounts
- Compare our accounts
- Our spreads
- Funding & withdrawals
- Open account
- Try free demo
- Platforms & tools
- Platforms & tools
- Platforms
- Platforms
- Platforms overview
- MetaTrader 4
- MetaTrader 5
- Mobile trading platforms
- Premium trading tools
- Premium trading tools
- Tools overview
- VPS
- Genesis
- Education
- Education
- Resources
- Resources
- News & analysis
- Education hub
- Economic calendar
- Earnings announcements
- Help & support
- Help & support
- About
- About
- About GO Markets
- Our awards
- Sponsorships
- Client support
- Client support
- Contact us
- FAQs
- Quick support
- Holiday trading hours
- Fraud and scam awareness
- Legal documents
- Home
- News & Analysis
- Trading Strategies, Psychology
- The Art Of War & Trading: Part 4
- Home
- News & Analysis
- Trading Strategies, Psychology
- The Art Of War & Trading: Part 4
News & AnalysisNews & Analysis军势篇 Chapter: The Flow Of Directing Troops (Trades)
Original Text: 孙子曰:凡治众如治寡,分数是也;
Translation: The control of a large force is the same principle as the control of a few men; it is merely a question of dividing up their numbers.Often beginner traders with relatively small accounts tend to treat them with less significance as they believe losing an amount of this proportion wouldn’t matter in the long run. These new traders may even say things such as “Had I had a more substantial account such as $10,000, I would not have lost as I’d take more care. In the spirit of Sun Zhu, this type of thinking would be incorrect.
Sun Tzu illustrated that you should not randomly increase or decrease the number of your positions just based on the money in your account.
Alternatively, you should separate your money into several parts (for example, ten parts), like a commander lining up their troops into several square formations.Upon observing a battle opportunity (a potential trade), you would allocate a fixed percentage of troops (money) to attack, for example, 20% of your money, and if it gains 5% of profit, you then retreat.
The detailed principles varied depends on your risk appetite, but please remember the key is——Do not change your rules discretionarily, especially when you have a few successful trades in a row, or you may be become blindly over-confident and increase the number of your troops in next battle unnecessarily.
Original Text: 凡战者,以正合,以奇胜
Translation: Any victory in warfare should be acquired by universal principles and supplemented with surprise strategy.This idea is an abstract one.
Qi (奇) means to surprise and tricks while Zheng (正) means direct and normal.
We can refer Zheng (正) to the fundamental aspects to illustrate the market, like Fundamental and Technical analysis, covered in episode 1 of this series, which Qi (奇) means keep misleading enemy’s expectation to one direction but attack in another direction.
The market knows how to use Qi (奇) more than you or I can imagine.
I did a simple summary regarding the direction of the price after a piece of news was released.Are you surprised by the results below? No matter the news is good or bad, the probability of the price increases & decreases is 50/50 chance.
This simple summary tells us that relying solely on Zheng (正)—— the traditional fundamental & technical analysis is not enough. Standard analysis can only help you to reveal the broad trend of the price but often fails to predict the short-term price fluctuations.The market assumes most of the participants will place buy orders after good news, and sell after bad news. It is human nature after all. Thus the market may take advantage of this by using the principle of Qi (奇) —— predicting your psychology and then look to move the price in the opposite direction if possible.
Original Text: 故善出奇者,无穷如天地,不竭如江海。终而复始,日月是也。
Translation: Thus, people who good at using Qi (奇), are inexhaustible as the sun rises and sets.Original Text: Qi (奇) Zheng (正)相生,如循环之无端,孰能穷之哉?
Translation: The direct and the indirect lead on to each other in turn. It is like moving in a circle–it never comes to an end. Who can exhaust the possibilities of their combination?Following on from what we discussed above, price movements are affected by both common factors, and psychological factors (Qi 奇) as well.
Common factors generally affect the overall trend while psychological factors usually affect short-term price fluctuations.
Take the following US Dollar chart as an example. You can see that it is a significant trend, and the US Dollar is dropping. Let’s say, for example, the latest Non-farm Payroll data was just released, and it is terrible news. The media will typically tell you whether this month’s number is better or worse than expected. In the usual way, you might assume “Well, the trend is dropping, and the news is bad, so I should sell.” You might even break your own rule of separating your troops and use all your money into selling the USD. This thought pattern would be a prime example of what Sun Zhi suggests not to do.
The market is smarter than you and already think one step ahead of you like a chess opponent.
The market may use the idea of Qi (奇) by pushing the price into a short-term rising trend (as the shadowed area in the chart), trigger your stop-loss line (like he captures your chess piece), and then the price trend reverts to normal.
Since we’ve already established that trying to conquer the market is not advisable, my suggestion would be to follow the significant trends and avoid battling with the market during a short-term abnormal trend. This suggestion is also another application of Sun Tzu’s shining ideology.
By Lanson Chen – Analyst
This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk.
Ready to start trading?
Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice.
Next Article
Fundamental and Technical Forecasts Ahead of the FOMC meeting
The FOMC Meeting is set to be the highlight of the week as it might revive the rising trend of the US dollar. Watchful eyes are glued to the reactions of the financial markets as the new tariffs officially take effect today. The policy divergence between the Fed and other central banks have put the US dollar in the spotlight and traders are k...
September 24, 2018Read More >Previous Article
Countries Using The US Dollar
The US Dollar is the most traded currency in the world and paired with all other major currencies. It acts as the intermediary in triangular currenc...
September 19, 2018Read More >We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies. You can view our cookie policy here.Manage consentPrivacy Overview
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.Cookie Duration Description AWSALBCORS 7 days This cookie is managed by Amazon Web Services and is used for load balancing. cookielawinfo-checkbox-advertisement 1 month Set by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category . cookielawinfo-checkbox-analytics 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics". cookielawinfo-checkbox-functional 1 month The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". cookielawinfo-checkbox-necessary 1 month This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary". cookielawinfo-checkbox-others 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. cookielawinfo-checkbox-performance 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance". elementor never This cookie is used by the website's WordPress theme. It allows the website owner to implement or change the website's content in real-time. PHPSESSID session This cookie is native to PHP applications. The cookie is used to store and identify a users' unique session ID for the purpose of managing user session on the website. The cookie is a session cookies and is deleted when all the browser windows are closed. viewed_cookie_policy 1 month The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data. _GRECAPTCHA 5 months 27 days This cookie is set by Google. In addition to certain standard Google cookies, reCAPTCHA sets a necessary cookie (_GRECAPTCHA) when executed for the purpose of providing its risk analysis. __cfruid session Cloudflare sets this cookie to identify trusted web traffic. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.Cookie Duration Description CONSENT 16 years 3 months 17 days 20 hours These cookies are set via embedded youtube-videos. They register anonymous statistical data on for example how many times the video is displayed and what settings are used for playback.No sensitive data is collected unless you log in to your google account, in that case your choices are linked with your account, for example if you click “like” on a video. SPSI session This cookie is used for setting a unique ID for the session and it collects user behaviour on the website during the session. This collected information is used for statistical purposes. vuid 2 years Vimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website. _ga 2 years The _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors. _gat_UA-2467324-17 1 minute This is a pattern type cookie set by Google Analytics, where the pattern element on the name contains the unique identity number of the account or website it relates to. It appears to be a variation of the _gat cookie which is used to limit the amount of data recorded by Google on high traffic volume websites. _ga_9P2FTXTH5P 2 years This cookie is installed by Google Analytics. _gcl_au 3 months Provided by Google Tag Manager to experiment advertisement efficiency of websites using their services. _gid 1 day Installed by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously. _uetsid 1 day This cookies are used to collect analytical information about how visitors use the website. This information is used to compile report and improve site. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.Cookie Duration Description IDE 1 year 24 days Google DoubleClick IDE cookies are used to store information about how the user uses the website to present them with relevant ads and according to the user profile. MUID 1 year 24 days Bing sets this cookie to recognize unique web browsers visiting Microsoft sites. This cookie is used for advertising, site analytics, and other operations. NID 6 months NID cookie, set by Google, is used for advertising purposes; to limit the number of times the user sees an ad, to mute unwanted ads, and to measure the effectiveness of ads. test_cookie 15 minutes The test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies. VISITOR_INFO1_LIVE 5 months 27 days A cookie set by YouTube to measure bandwidth that determines whether the user gets the new or old player interface. YSC session YSC cookie is set by Youtube and is used to track the views of embedded videos on Youtube pages. yt-remote-connected-devices never YouTube sets this cookie to store the video preferences of the user using embedded YouTube video. yt-remote-device-id never YouTube sets this cookie to store the video preferences of the user using embedded YouTube video. yt.innertube::nextId never These cookies are set via embedded youtube-videos. yt.innertube::requests never These cookies are set via embedded youtube-videos. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.Cookie Duration Description AWSALB 7 days AWSALB is a cookie generated by the Application load balancer in the Amazon Web Services. It works slightly different from AWSELB. DEMO_FORM_PCODE past No description geot_rocket_city session No description available. geot_rocket_country session No description available. geot_rocket_state session No description available. ms-uid 1 year No description available. SPSE session No description available. STYXKEY_geot_country session No description _uc_current_session 1 hour No description available. _uc_initial_landing_page 1 month No description available. _uc_last_referrer 1 month No description available. _uc_referrer 1 month No description available. _uc_visits 1 month No description available. _uetvid 1 year 24 days No description available. Please share your location to continue.
Check our help guide for more info.