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A Book of Five Rings by Miyamoto Musashi

A Book of Five Rings (or Go Rin No Sho) was written by the samurai legend, Miyamoto Musashi, in 1645. I read this text several years ago and while the central theme is ‘strategy’, the lessons that left a lasting impression concerned ‘true understanding’ and the importance of practice; of practising one’s arts, one’s discipline, one’s techniques. Practising until third nature becomes second nature, becomes first nature. In this age, when knowledge is plentiful and experience lacking, I believe there is much to be learned from Musashi’s wisdom:

The Kendo student practises furiously, thousands of cuts morning and night, learning fierce techniques of horrible war, until eventually sword becomes “no sword”, intention becomes “no intention”, a spontaneous knowledge of every situation. The first elementary teaching becomes the highest knowledge, and the master still continues to practise this simple training, his everyday prayer.

Study this book; read a word then ponder on it.  If you interpret the meaning loosely you will mistake the Way.

If you merely read this book you will not reach the Way of strategy.  Absorb the things written in this book.  Do not just read, memorise or imitate, but so that you realise the principle from within your own heart, study hard to absorb these things in to your body.

“To know the times” means to know the enemy’s disposition in battle.  Is it flourishing or waning? By observing the spirit of the enemy’s men and getting the best position, you can work out the enemy’s disposition and move your men accordingly.  You can win through the principle of strategy, fighting from a position of advantage.

…the way to understand is through experience.

You must bear this in mind.

Practise this well.

You must research this well.

You must appreciate this.

You must train constantly.

You must consider all this carefully.

Study this well.

You must train hard to understand it.

With detailed practice you should be able to understand it.

If you train well enough you will be able to strike accordingly.

You must train repetitively.

Learn this well.

4 Trading Quotes for Today's Trading Session

“You must practice being a successful trader first. From that state of mind you will get information about what to do, and that will produce what you want to have.”

“Excellence is about stepping outside the comfort zone, training with a spirit of endeavor, and accepting the inevitability of trials and tribulations. Progress is built, in effect, upon the foundations of necessary failure.” 

 “Amateurs keep thinking what trades to get into, while professionals spend just as much time figuring out their exits.”

“Confidence doesn’t come from being right all the time: it comes from surviving the many occasions of being wrong.” Brent Steenbarger, The Daily Trading Coach “When you attain some degree of control over yourself, you can then see how other traders are not in control of what happens to them.”

5 Qualities essential to the equipment of the speculator

  1. Self-Reliance. A man must think for himself, must follow his own convictions. George MacDonald says: “A man cannot have another man’s ideas any more than he can another man’s soul or another man’s body.” Self-trust is the foundation of successful effort.
  2. Judgment. That equipoise, that nice adjustment of the faculties one to the other, which is called good judgment, is an essential to the speculator.
  3. Courage. That is, confidence to act on the decisions of the mind. In speculation there is value in Mirabeau’s dictum: “Be bold, still be bold; always be bold.”
  4. Prudence. The power of measuring the danger, together with a certain alertness and watchfulness, is very important. There should be a balance of these two, Prudence and Courage; Prudence in contemplation, Courage in execution. Lord Bacon says: “In meditation all dangers should be seen; in execution one, unless very formidable.” Connected with these qualities, properly an outgrowth of them, is a third, viz: promptness. The mind convinced, the act should follow. In the words of Macbeth; “Henceforth the very firstlings of my heart shall be the firstlings of my hand.” Think, act, promptly.
  5. Pliability the ability to change an opinion, the power of revision. “He who observes,” says Emerson, “and observes again, is always formidable.”

Reflections on Life, Motivation, and Impotent Goals

Motivational guru Tony Robbins once observed, “People are not lazy. They simply have impotent goals – that is, goals that do not inspire them.” My experience is that this is very true of traders: many of their goals are impotent. They are written in a journal or a post-it note attached to the computer monitor, but they are not inspiring goals. They don’t bring a hunger for action.

We chastise ourselves for lack of discipline when we don’t follow through on our goals, but we never stop to think that maybe our goals sell us short.

Show me a person who has trouble getting out of bed in the morning and I’ll show you a person with impotent goals. A child has no problem leaping out of bed early Christmas morning to see what Santa has brought. That same child on a school morning? It might take a few rousings to get out of the sack.

A big part of middle age is getting so caught up in putting out fires that you forget all about setting the world ablaze. Kids have no problem dreaming about hitting that 9th inning home run for the Yankees or being a superhero. Somehow that gets lost in concerns over “practical” matters, as The Little Prince realized. But an impotent life is not a practical life at all.

Your job isn’t to find the next great market trend or setup. It’s to find the goals that inspire you, that will get you springing out of bed in the morning and excited to be tackling life through the day. As long as you have those, you’ll stay young at heart–and spirit. And you’ll persist and find those trends and setups.

Respect the Pattern

Our view is that we need to respect the spirit of any pattern and not worry too much about the letter of the law, so to speak. Opens and closes on doji candles need not be exactly the same. Island gaps reversals (abandoned babies) need not have actual gaps. Why? Because 24-hour trading, decimalization, derivatives, etc… have changed the landscape and what constitutes an open and a close is now a very fuzzy proposition.

The financial markets are radically different than they were last century, last decade and even last year. The spirit of the tools still works because humans do the same old dumb (and occasionally) smart things over and over. It is the actual rules of the analysis that are questionable so keep it simple and you should be fine.

Stubbornness

If it doesn’t pay off the first time forget it.

Perseverance is a good idea for spiders and kings, but not always for speculators. Don’t fall into the trap of trying to squeeze a gain out of any single speculative entity.
Don’t chase any investment in a spirit of stubbornness. Reject any thought that an investment “owes you” something. And don’t buy the alluring, but fallacious idea that you can improve a bad situation by averaging down.