Every Investor, Trader, Fund Manager or Portfolio Manager is an
Emperor or King of his or her own trading Empire.
It's been a long and hard decade.
Having been managing investment portfolios and accounts for
the past decade both professionally and personally, me, like
an army of other portfolio managers out there, are not only
looking for the perfect trading system, but also the perfect
way to manage an investment account.
Indeed, there are whole bombardments of theories of risk
management and portfolio management out there that it is mind
boggling. There are risk management concepts that attempt to
govern each investment trade and position sizing based on
complex probability calculations and there are even concepts
that were born in Las Vegas, claiming what high stake poker
gamblers do. The problem with these concepts is that they are
mainly mathematical concepts that took the human factor out
of the game completely.
Let's face it, if you have ever managed a portfolio or an
investment account, you will know that it is never as simple
or left to chance as a game of poker and it is never as
mechanical and emotionless as the mathematical calculations
After a decade of thinking along these lines, I realized
that these portfolio management concepts are important but
there must be something on top of these that must govern the
mind that executes these concepts. This 'Meta Program' must
be the 'Operating System' in the mind of the portfolio
manager and rule the way the portfolio manager or trader
looks at a portfolio or investment account. With such a 'Meta
Program' in mind, the portfolio manager will be able assess
changes in a portfolio or investment account in the right
light and to behave in ways that are appropriate to the
Here I present my personal Meta Program called the Portfolio
Management Art of War.
Every Investor, Trader, Fund Manager or Portfolio Manager is
an Emperor or King of his or her own trading Empire. Your
Empire exists in a world that is engulfed and consumed in an
eternal warfare. This world is called the Exchange (stock,
forex, commodity or whatever exchange you are involved
The boundaries and resources of your Empire are defined by
the size of your Fund. Some Kings have bigger territories and
some have smaller ones but all are driven by the common need
to survive in the Exchange by expanding their territories and
As a King, your mandate in the Exchange is to find ways and
means to expand your Empire over time. If that cannot be
done, you will soon find that you might not be the King of
this Empire for very long.
In order to expand one?s territory, one must lead one's
Empire into war against the rest of the Exchange. Some Kings
are more aggressive and some, more conservative. Regardless
of level of aggression, every King's resources must be
committed in various ways into battle against the Exchange.
Every winning battle expands the King's territory and every
losing battle loses part of the Empire and the boundaries
shrinks. Some King has a target boundary size but know that
as long as you remain a King, you will one day be drawn into
battle against the Exchange again. The war in the Exchange is
In order to battle in the Exchange, every King must have a
Strategy. Some splits one's army up into many squads which
fights independently and some engages in a total war against
the Exchange with the whole Empire leaving only very little
backup. Some organizes one's army into many functional
squads, with some squads fighting more aggressively and some
squads fighting more conservatively. This Strategy is called
the Portfolio Management System that the King chooses to
adopt. Each squad then fights using specific Tactics called
How a King chooses his Strategy and Tactic depends largely
on the part of the Exchange that a King chooses to fight in.
Every part of the Exchange (Forex or commodity or equity
etc..) has its own unique characteristics and rules of
engagement which the King must be thoroughly familiar
Every time a King sends forward a squad to do battle in the
Exchange by drawing upon his Empire and placing a position in
the Exchange, it must always be held in mind that there is no
guarantee that you will ever see that brave general that was
being sent forth again. If the squad loses, you lose a part
of your Empire to the Exchange. Therefore you must take very
frequent look at the overall map of your Empire (which should
always be pinned up prominently in your war room.) and
monitor how far back the Exchange has taken your Empire
before thinking about and making your next move. If the squad
wins, that general expands your Empire farther into the
Exchange. That gives you more resources and more troops to
wage your next battle. The King must then decide how these
new resources are to be deployed. Shall he assign the new
troops into his existing squads? Should the King hold the new
troops and resources back as backup for future battles?
Should the King expand on the number of squads using the new
troops? Strategic deployment of these resources could turn
the tide of the entire war.
Before a King sends a squad forward, he must first assess
the capability of the General that is to lead this assault.
This is your Research. If you are highly confident that this
General will win the battle, should you give him more troops
so that he can claim more territory? If you are slightly less
confident of that General, should you cut back on his troop
or hold back the assault altogether?
Finally, if your Empire has been compromised and the
Exchange has claimed a significant portion of it, is it time
you consider a change in Strategy and Tactics? Even if the
Exchange has claimed a large portion of your Empire, you
might still be able to wage a series of battles so successful
that you could probably claim the Empire that you started
with and maybe even more, like so many famous Kings and
Generals in the world. So, even if your Empire has taken a
rough hit, it is not time to surrender yet. You are the King.
If you give up, the whole Empire falls.
With this Meta Program in mind, you will be able to apply
many of the famous art of war and their centuries of wisdom
on top of the modern finance techniques that you have learnt
in order to have even more certain survivability for a long
time to come.
Every King needs a tactical map. I have made one such map
which you can use for free in order to have a strategic
overview of your Empire and help you keep the metaphor in
mind at http://www.mastersoequity.com/metamap.htm
For everything you want to know about option trading, please
Jason Ng is the Founder of Masters 'O' Equity Asset
Management. He is a fund manager specialising in options
trading and his Star Trading System has helped thousands.
Please visit http://www.MastersoEquity.com