Game of Chess Anyone?

In Malcom Gladwel’ book, blink, Lieutenant General Paul Van Riper’s, a veteran of Vietnam and Desert Storm was talking about strategic military decision making:

“Some of these new thinkers say if we have better intelligence, if we can see everything, we can’t lose,” Colonel Van Riper said. “What my brother always says is, ‘Hey, say you are looking at a chess board. Is there anything you can’t see? No. But are you guaranteed to win? Not at all, because you can’t see what the other guy is thinking.’ More and more commanders want to know everything, and they get imprisoned by that idea. They get locked in. But you can never know everything.”

I really like the analogy about the chess board.  If you think about it, the stock market is like a chess game.  You can never know what a stock is going to do, because you can never know everything about a stock all the time.  For example, we don’t even know what the CEO is thinking, never mind anyone else.

Also, instead of one so called opponent, you have thousands that are trying to win. Now when I say win, I do not believe they are trying to win at your expense, they just want to make sure that they are making money.

But we can’t know what the thousands of stakeholders that are in the same game as us are thinking.  It is my belief therefore that the only way to consistently win in the market is to embrace the chaos of it.  What I mean is accept that it doesn’t matter if you are right or wrong on a trade, just have a system that controls your losses and takes advantage of your winners and lets them go on a run.  Effectively taking yourself out of the decision making loop.

May today be a profitable day…for all of us.

John