Tuesday, June 20, 2006

Ancient wisdom on trade

When King Gou Jian of Yue was in desperate straits on Mount Kuaichi, he followed the advice of Fan Li and Chi Jan. Chi Jan said:

One who knows how to compete prepares in advance; one who understands seasonal needs knows commodities; and a grasp of these two things enables him to understand the whole market.

Each year is dominated by an ‘element’. Metal means a good harvest, water a flood, wood a crop failure, and fire a drought. In times of drought, invest in boats; in times of flood, invest in carriages. This is the principle to follow.”
(Think cycles.)
[Records of the Historian]

Ancient wisdom is not difficult to understand or follow, but at times some people like to do it, their way. (Think bypaths.)

They invest or trade when things are rather expensive and look for ‘bigger fools’ to chase the commodity or share prices higher. Such events are not uncommon in commodities and shares trading. Many like to buy high to sell higher. And more often than not, they get ‘burnt’. Unfortunately, most of these types of investors never learn.

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