The Warrior’s Guide to Trading

Miyamoto Musashi (1584 – 1645) was a famous Japanese samurai.

He is considered by many to have been one of the most skilled swordsmen in history. Musashi became legendary through his outstanding swordsmanship in duels, even from a very young age.

He is the author of ‘The Book of Five Rings’. A relatively short book (c. 150 pages) on warfare strategy, tactics and philosophy.

Almost 500 years later and you can find this book on the shelves of some of the greatest traders and investors in the world.

His writings on timing and staying calm in the midst of chaos are as relevant to successful trading today as they were to martial artists in the 17th century.

In today’s letter, we explore some of our favourite quotes from this book on strategy and mental discipline. We also explore Musashi’s buddhist lessons on balance, spirituality and focus.

“You should not have a favourite weapon. To become over-familiar with one weapon is as much a fault as not knowing it sufficiently well.”

This quote ties beautifully into the art of technical analysis. You should never become overly reliant on just one technical indicator or indeed just one time frame.

Each indicator and time frame tells a different story. And you’ll want as complete a picture as possible before you put skin in the game.

Price action can tell a different story once you zoom out and look at a different time frame.

If you are looking to branch out or just need a refresher on what is available, I have a ? full technical analysis course on Youtube ?.

“In short, the way of the Ichi school is the spirit of winning, whatever the weapon and whatever its size”

Traders are in the game to win. If we didn’t think we had a chance to make a profit, we wouldn’t be here. However, sometimes it is important to challenge our perspective of what constitutes a win.

Profit or loss is not the determinant of a win or loss. We aren’t trying to win 1 trade, we are trying to win the next 100. Thus the true measure is the discipline to stick to your system whatever the outcome.

At the end of one of our previous letters ?, we have shared an article on taking profit.

“Timing in strategy. There is timing in everything. Timing in strategy cannot be mastered without a great deal of practice”

FOMO can often lead to traders entering a position too early. However, patience and self discipline can go a long way.

There is a lot of benefit from taking a step back and waiting for the right entry. You can then let the routine price fluctuations work to your advantage. That is to say: if you are looking to go long, you can identify the dips and wait to buy there.

More often than not, you will find that applying a bit of patience means you can enter at a better level.

“Generally speaking, the Way of the warrior is resolute acceptance of death”

Probably one of the most standout lines in the text. We must accept that we will lose on occasion. No one wins every trade.

The sooner you appreciate this, the sooner you can cut loss making positions without bleeding out.

Traders should have pre-determined stop loss levels. By the time you enter a position, you are likely too emotionally invested to set an appropriate level.

Once you have set this pre-determined level, stick to it. Practise discipline. Know you may have been wrong this time but you will get it right more often than wrong.

Check out The Art Of Trading a Losing Position ? section of a previous letter for more on this.

“It is important to start by setting these broad principles in your heart, and train in the Way of strategy. More than anything to start with you must set your heart on strategy and earnestly stick to the Way”

You can’t blame others in trading. You can use this newsletter, YouTube, Twitter, books and whatever other resources under the sun for inspiration. At the end of the day, you are the one who has to personally resonate with your trading strategy.

As you set your 2021 resolutions, own your trading journey and take responsibility and initiative to grow and develop your own ‘way’.

Commit to continuing to learn and grow, remembering the compound effect of small new lessons each day.