One of the most colorful characters in Japanese folklore is a samurai named Miyamoto Musashi.
Musashi was known for unsavory habits, such as the rumor he never took baths and rarely changed clothes (for fear of being surprised while unarmed).
But Miyamoto Musashi is better known for being the greatest samurai who ever lived.
According to lore and his own written account, Musashi’s first battle came at the age of thirteen, in which he beat his older opponent with a six-foot quarterstaff.
Between the ages of thirteen and thirty, Musashi went on to fight 60 duels against 60 different swordsmen, vanquishing them all. He likely killed scores more in three major military campaigns.
To add insult to injury (for his opponents), Musashi liked to use a wooden sword.
In his later years Musashi wrote “The Book of Five Rings,” a classic guide to swordsmanship and military strategy that is still studied today.
In both fighting and writing, Musashi was known for being straightforward and direct, shunning artifice and technical flourishes.
In describing what he called “the five attitudes,” Musashi said this:
Although attitude has these five divisions, the one purpose of all of them is to cut the enemy. There are none but these five attitudes.
Whatever attitude you are in, do not be conscious of making the attitude – think only of cutting.
To “think only of cutting,” as I interpret the instruction, is to concentrate the mind on the task at hand. To not be drawn off course or distracted by externalities, but to simply focus on the present moment – executing on the objective as swiftly and cleanly as possible.
Being in the zone
I was reminded of this 17th-century advice while thumbing through a decidedly 21st-century text – a book called “Ready for Anything” by personal productivity guru David Allen.
(I am somewhat obssessed with efficiency and process, and have written up an Allen talk here.)
In relation to “thinking only of cutting,” Allen talks about being “in the zone” and what it looks like:
The art would be to stay in that zone all the time – to keep the appropriate amount of attention focused on the most appropriate thing, from the most appropriate perspective, for the appropriate length of time. No more, no less. Then refocus on the next thing, in the same way, with 100 percent positive creative energy.
This would be a Zen-like state of productivity, in which you deal with what’s present from a perspective that is both detached and fully engaged. It’s the ultimate executive style – show up, integrate, think, decide, and dispatch, intelligently informed by internalized outcomes, visions, and standards. You worry about nothing before, nothing after. Clean, clear, precise, with no residue. No ripples left in the water…
Does that describe how you trade? Wouldn’t it be great if it did?
Wouldn’t it be great to move further in that direction – to cultivate an elevated level of existence, in which trading (and life) simply becomes a flowing river of next actions, “thinking only of cutting” as we fluidly handle each one in turn?
This state of “no mind” – totally focused, yet fully relaxed and present – is incredibly powerful, because it makes for max power and max effectiveness.
Bruce Lee called it having a mind like water:
Empty your mind, be formless, shapeless – like water. Now you put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle. You put it in a teapot, it becomes the teapot. Now water can flow or it can crash. Be water, my friend.
The reason to be formless and shapeless, of course, is so we can focus on appropriate action free of distraction – so we can think only of cutting.
How might this apply to trading specifically?
Well, consider the time-tested trading maxim, “Don’t think about the money.”
It’s something of a paradox: You have to watch your P&L in order to practice proper risk control. You can’t be cavalier about risk when it comes to precious capital. But at the same time, you must remain detached.
If you start looking at trades in terms of the money – your next mortgage payment, or a Hawaian vacation, or your kid’s tuition bills – you run the risk of freezing up or doing something foolish. “Thinking of the money” can be a deadly distraction.
The antidote to thinking about the money is a clear-eyed focus on process. The more you focus on process – why you are making the trade, why your methodology is sound and why the next action is appropriate – the more calmly and rationally you can act in line with your objectives.
When you focus on process, you hone in on determining the appropriate series of next trading actions independent of emotional distraction. When you make it your goal to execute on your trading process with skill, detachment and precision, even in the heat of battle, you are thinking only of cutting.
Future goals foster present alignment
Here is another idea from David Allen that goes hand in hand with the “cutting” concept: Future goals foster present alignment, which then serves the present moment.
As Allen writes,
A vision of a desired future allows you to focus immediately on an improved condition. It changes what you perceive and how you perform – now. Its value is not actually about achieving something in time, but rather about how it changes the substance and quality of the decisions you’re making in this moment. It affects what you choose to perceive, feel, and do in the present.
Here is a personal example:
Professional athletes tend to peak in their twenties. But world-class global macro traders tend to peak in their fifties – or even their sixties – because there is such huge value-add in cumulative experience over multiple market cycles.
As I write these words, I am thirty-five years old — a mere pup by global macro standards. Soros didn’t become known as “the man who broke the Bank of England” until age 62. That means I have a solid thirty years (if not longer) to reach my skill and experience peak, and in doing so, to fulfill my goal of joining the pantheon of global macro greats.
The actual finish line is decades away – but the future goal isn’t the point. It’s all the small and subtle ways I find myself aligned toward the goal… all the things I do, both consciously and subconsciously, to climb a little higher on that mountain each day.
The future creates the present
When you really think about it, then, the future creates the present.
An odd statement I know, but look at the logic:
- The present moment is all that exists.
- And yet, past and future both exist within the mind.
- Experience shapes who we are, but goals shape who we become.
- As such, the future creates the present.
This also explains why so many traders have troubles.
For instance, how many times have you heard the discipline lament: “I just can’t honor my stops,” or “I just can’t resist revenge trading,” or “I can’t help selling out too quickly” and so on.
There are countless ways to screw up on the discipline side of the ledger – where you consistently fail to do what you know you are supposed to do, or consistently indulge in habits you know are bad.
I would argue these self-discipline problems often come down to poor alignment with future goals.
As Lao Tzu said, “If you do not change direction, you may wind up where you are heading.”
But many traders have no idea where their compass is even pointing!
For example: The trader in search of emotional thrills or escapist fantasies is virtually guaranteed to have trouble with trading discipline.
Why? Because the “discipline” and “rules” of day-to-day life are precisely what he desires to escape from, so why would he want them in his trading?
His future goals of escape, to the degree they exist in his subconscious, are actively destructive.
The trader with a focus on attaining mastery, on the other hand – and a specific vision of what that means, what it looks like – has a very different set of future goals, which in turn create powerful alignment with the present.
How easy does it become to “honor thy stop,” or otherwise take the correct and necessary action, when you see yourself as a master trader in the making, executing flawlessly on what will be one of your next thousand trades?
How much easier does it become to act fluidly in the present when all your next actions are aligned with an inspiring goal?
Once again, the present moment is all that exists. And yet, past and future co-exist in the confines of your mind. To the degree that your future goals and the image of your future self are aligned with the present, you have a template and a guide for bringing about the results that you seek.
You then take that template, that guide, and combine it with intuitive awareness – skilled observation and analysis of the present moment. From there you determine a series of next actions.
And as you take on each action, one by one in turn, you think only of cutting.