Let me tell you a short story…
Two Chinese War Generals are preparing their armies for an impending battle. It is the 14th century.
General Ma spends his time training his soldiers to use various weapons – swords, spears, bows and arrows. He ensures his army is well versed in both armed, and unarmed combat. In terms of raw physical capability, each soldier is a fighting machine. General Ma focuses all his efforts on the content of battle.
General Li instead, spends 80% of his time studying the battlefield landscape and weather patterns – Is it a mountainous region? Or is it a swampy area? Is the place prone to heavy rainfall? Or is the climate hot and dry? What about the strength and direction of the wind? General Li focuses 80% of his efforts on understanding the context of battle while using only 20% of his time to train his soldiers based on what he has learned.
Spies of General Ma report: “My Lord, General Li spends most of his time walking along the dry savannah fields where the battle is to commence. He simply sits and gazes up at the clouds. Occasionally, he walks along the nearby river and takes a drink of water. Meanwhile, his soldiers remain in camp, sewing uniforms and building campfires! They spend only a few hours each day training for combat. They are a bunch of weaklings ill-prepared for war. We’ll win this battle for sure!”
Filled with confidence, General Ma continues training his soldiers hard. He knows that although he has the upper hand, he must not be lax in war preparations. This is, after all, a matter of life and death.
On the day of the battle, General Ma leads his troops to the battlefield. Heavily armed and armored, his battalion is a fearsome sight! As Ma approaches the field, he sees that Li’s army is already there and waiting.
“It looks like General Li is eager to meet his maker,” he chuckles to his military advisors. “And look! His men are wearing simple clothes with practically no armor… and what? No boots? They are wearing just sandals! General Li has gone mad! Does he expect to defeat me with such a paltry army? Pathetic!”
General Ma looks again at his adversary. He feels a cold wind across his face.
“It is time,” he says. “Sound the battle horn. Li will be defeated by sunset.”
General Ma steadies his horse. The battle horn thunders across the battlefield.
“Charge!!” General Ma roars.
Suddenly from a distance, he sees Li’s men bring out stacks of bows and arrows.
“Now, he must really have gone mad!” Ma exclaims, “There’s no way those arrows will reach my soldiers from that distance!”
“…And my horsemen will penetrate their front line before they can reload and fire again. This battle is as good as over!” He laughs in amusement. “This will be the easiest victory in the history of China!”
“Keep charging towards them!” He orders, “Kill every last one of them! Bring me Li’s head!”
Ma had already begun to imagine his victory march back to the capital city. He will surely be richly rewarded for defeating Li’s army!
But suddenly, he sees a flash of light in the distance.
“What is that?” Ma squints his eyes to see.
“General Ma! They are lighting their arrows with fire!” a scout reports back.
In a flash, Ma realizes what’s happening.
A rain of fire arrows blanket the sky, as they land just short of Ma’s soldiers.
“All men! Pull back! Pull back!!” Ma screams. He instantly recognizes the impending disaster.
The grass in front of his troops begin to catch fire.
The cold wind that was ignored just moments ago, has now begun to spread the fire rapidly towards Ma.
A few solders have already caught on fire.
“Retreat!! Retreat!! All forces! Pull back immediately!” Ma screams as he watches his men burn to the ground, one by one.
“My Lord,” an advisor whispers, “we must withdraw ourselves from this place!”
More men catch fire, as the wind continues to fan the growing blaze.
Ma’s soldiers struggle to run back as they are encumbered by the bulky armor and boots.
General Li orders his men to give chase. He isn’t too worried about the fire – after all, his men are wearing light-weight, flame-retardant uniforms.
“General Ma!” A scout reports, “we are flanked by two large rivers – to retreat we must cross them!”
Ma stumbles back and falls to the ground.
He realizes why Li had arrived early to the battlefield – to secure an advantageous position where the wind would be blowing from!
Now, his retreating army is trapped between a rapidly approaching wall of fire, and two rivers.
And with the bulky armor hindering his soldiers’ movements, they would either be cooked alive, or weighed down and drowned in the river.
A look of fear flashes across Ma’s face.
“It’s over,” he stammers in disbelief. “This battle was over before it even began.”
Moral Of The Story
With most challenges in life, even a mediocre understanding of the environmental context is more important than mastery of the content.
While the content is concerned with answering the ‘how’ question, the context is concerned with the ‘why’.
Whether you are an honored General or a Forex trader, have you surveyed the environment you’ll be operating in?
Have you positioned yourself in an advantageous position to begin with? What are your strengths and weaknesses?
Are you properly equipped to fight the battle on your terms?
Or do you simply show up for battle with a bunch of “well-learned” techniques and expect to win?
Think about how you’ve been approaching your trading.
Are you like General Ma? Or General Li?
If you want to understand the environment context of retail Forex trading, check out my book, Forex Dreaming.