“Think Only Of Cutting”

June 22, 2011

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.

“Think only of cutting” is perhaps the clearest encapsulation of Musashi’s philosophy.

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.

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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.”

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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.

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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.


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15 Responses to “Think Only Of Cutting”

  1. Jack Sparrow on June 23, 2011 at 2:42 pm

    Thanks! Tell your friends 🙂

    Or better yet, come back and share your successes / areas you've improved etcetera. We love hearing from fellow traders.

  2. Mubo on June 23, 2011 at 6:42 pm

    Any insights on how to manage my time, I am constantly submerged by newsflow, research to read, price action to watch… I remember reading something on this in HedgeHogging but would be interested to get your take on this

    • Jack Sparrow on June 23, 2011 at 10:46 pm

      It's a great question.

      I could talk about that stuff for hours (production flow, time and energy reserves, process management etc) — been focused on it for years and it's an area I continue to work on every single day.. Lemme noodle on it and get my thoughts into a coherent structure…

      • Mubo on June 24, 2011 at 8:19 am

        Thanks! Looking forward to read that one…

  3. Lee on June 25, 2011 at 12:20 am

    Very thought provoking – it's always a bit scary to set a big goal like being world-class but this makes me think lesser goals may not be worth bothering with, may even actually impede my progress!
    Good stories too, I don't know much about Japanese culture from the middle-ages but what I do know is fascinating.

    • Jack Sparrow on June 30, 2011 at 4:38 am

      My hunch is that goal size should be custom-fit. Jerry Seinfeld said that, when starting out as a comedian, his goal was simply to be one of "those guys." That kind of thing can work too.

  4. Kamal on June 25, 2011 at 11:55 am

    Jack, very thought provoking article and love your writing style, simple and lucid.

  5. Andrew Menaker PhD on June 25, 2011 at 2:32 pm

    "The Book of Five Rings" is part of a series, with my personal favorite of the series titled, The Unfettered Mind" by Takuan Soho.

    Although I like to apply zen concepts and the idea of flow, or being in the zone to trading, I also have to say that being in the zone is somewhat overrated. As a trading psychologist and active trader myself, I see two reasons for this:

    One, we spend very little time in the flow state, and if you look at your own trading or the trading of highly successful traders you'll see that many traders are not the necessarily in the 'zone' when those big fat profitable trades happen; sometimes, but often not. I've seen this many times in myself and in my clients.

    Two, sometimes, or often times, efforts or attempts to get into the 'zone' while trading can actually push us further away from the very state we're trying to achieve. This is when 'effort becomes struggle'. And if you know zen, you know that struggle is counter-productive. I've done a little work in sports psychology, and my colleagues that are sports psychologists working with elite athletes sometimes say the say that the zone is over-rated and mis-understood by many. An athlete(or trader) spending a lot more time struggling with themselves 'trying' to get into the zone, would see a better return on their efforts by directing their focus and and being prepared to handle situations that knock us down, take us by surprise, etc (things that put us on tilt). By doing that, one actually creates internal conditions more conducive to being in the zone. In many ways the 'zone' is simply an internal condition where our normal emotional baggage is not active….and this can be achieved through active efforts to deal with emotional discomfort that gives weight to our emotional baggage.

    Andrew Menaker, PhD

    • Jack Sparrow on June 30, 2011 at 4:29 am

      Interesting stuff, sorry for delay in getting back on this.

      I think we might have different conceptual perspectives as to what 'being in the zone' means. I try to spend as much time in the zone as possible, but for me this is not some anxiety-inducing thing. I consider myself in the zone when I am flowing creatively in my research and my work, to the point that my conscious "I" no longer registers because I am so immersed in whatever I'm doing.

      In respect to markets, there are certainly times when a trader feels more in sync with markets than others — when the "market script' is really flowing and all the pieces are falling into place. Achieving this sense of flow might also be considered being in the zone. But again, I don't see such as an anxiety inducing pursuit. It is simply a state of attainment we strive for, like a golfer calmly striving to play their best 18 holes.

  6. brett on July 3, 2011 at 12:28 am

    Consider this:
    The zone is in fact the absence of anxiety.
    Put another way: Peace and calm in one's mind/spirit regardless of circumstances.
    This comes with the homework you and MM encourage, but also, with time (age) and experience (losses).
    Is there such a thing as a 23 year old zen master?
    Keep up the great work.

    • Jack Sparrow on July 7, 2011 at 2:02 am

      Thanks! And mostly agree, though with a small caveat. I would define being in the zone as not just an absence of anxiety, but an absence of all self-referencing emotions — a dissipation of self awareness. When truly engaged, the ego turns to mist and the "I" vanishes completely.

      Richard Feynman talked about this. As a very young physicist working with legends at Los Alamos, Feynman was frequently introduced to intellectual heroes and other great men who made him nervous. But the nervousness always disappeared when actually discussing physics, because his natural engagement with the topic was such that he — the part that said "I am Richard Feynman's ego" — was no longer there.

      You might call this a sort of accidental zen where Feynman's passion for a topic (physics) allowed him to seamlessly enter an immersive state when discussing it (even at a very young age without training). Of course, it definitely takes practice, wisdom and experience to cultivate this state at will and apply it in various walks of life.

      • Clarice on January 22, 2014 at 6:05 am

        Hey Lee,This is why I believe tadirng is one of the hardest things to master if one can ever master it at all. The highs and lows can be so great, that it is tough to keep an even keel. But as you progress you will realize that that is part of the job as a trader to just take what comes and move on.Try keeping a diary of your emotions, this can help when you review your week/month that when you are having more winners than losers you realize the losers are just a part of doing business and are not worth getting pissed over.

  7. brett on July 10, 2011 at 12:19 am

    excellent observation about Feynman.
    And since I've never heard of him, now, because of you, I'll go look 'em up!

    Your content is great, but it's your generous willingness to bat ideas around that make the site so valuable.

    MT offers that unique blend of macro/technical trading observations, blended with emotional/spiritual management that is needed to elevate one's game.

    You're like portfolio management coaches. Thank you.

    • Jack Sparrow on July 10, 2011 at 7:13 pm

      Thanks! "Surely you're joking Mr. Feynman" is an excellent beach read. Light and fun but also thought provoking.

      Mercenary Trader on the whole, in addition to being great fun, is sort of a big systemic feedback loop. We focus our energy on areas that interest us and engage us as active traders and portfolio managers — "thinking out loud" in a structured format — and it just so happens that others with the same passions get to benefit. And then as the community builds, there is excellent feedback and benefit there too… looking forward to seeing where it goes. Thanks for taking part!

  8. Rogue on July 16, 2011 at 10:06 am

    "…focus on attaining mastery…"

    Says it all, really. Nothing more, nothing less.

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