Summary of the Art of War — Chapter 2: Lines of Operation (作战线与防过分散)

"Simple and well-defined lines of operation bring rapid success; over-extended and fragmented lines bring logistics failure." — General Antoine-Henri Jomini

The Military Context

In Chapter 3 of Summary of the Art of War, Jomini analyzes Lines of Operation (作战线)—the routes an army follows to move supplies, reinforce units, and strike targets.

Jomini demonstrates that armies operating on "Interior Lines" (compact, connected supply routes) can concentrate and shift forces far faster than an enemy operating on "Exterior Lines" (fragmented, distant supply routes). Over-extending lines of operation leads to logistics breakdown and vulnerability to ambush.

The Wall Street Translation

In trading, your portfolio is your supply line. Every position requires ongoing tracking, risk auditing, news monitoring, and exit execution.

1. The Danger of Over-Extended Portfolios (组合过分散的危害)

When a trader owns 40+ different stocks across 10 unrelated sectors: - Cognitive Overload: It is impossible to track 40 earnings reports, SEC filings, and sector shifts simultaneously. - Logistics Breakdown: Stop-losses get missed, position sizing becomes chaotic, and winning trades are canceled out by poor trades.

2. Operating on Interior Lines (内线作战之优势)

Keep your active trading portfolio compact (e.g. 6 to 10 stocks in 2 to 3 leading market sectors): - Rapid Maneuver: You can shift capital or exit positions in minutes when market conditions change. - Deep Research: You can thoroughly understand every company's earnings, management, balance sheet, and technical levels.

3. Pruning Weak Positions (及时剪除弱势线条)

Just as a general abandons secondary supply lines to reinforce the main force, a trader must prune stagnant or losing positions to free up capital for leading stocks.

Actionable Trading Rules

1. Enforce a Hard Position Limit: Limit total active individual stock holdings to a maximum of 10 positions at any time.
2. Prune Bottom Performers Regularly: Sell your 2 weakest-performing stocks monthly to concentrate capital into your top 2 gainers.
3. Maintain Sector Neutrality Limits: Do not allocate more than 30% of total portfolio capital to a single industry sector.