The Line of Least Resistance

"Never renew an attack along the same line after it has failed... The line of least resistance is the only path to swift victory." — B.H. Liddell Hart

The Military Context

If an attack fails, Liddell Hart argued that repeating it along the same path is foolish. The enemy has identified your strategy and reinforced their defenses. Instead, you must seek the Line of Least Resistance—the path where the enemy's defenses are weakest or non-existent. By advancing along this line, you can bypass their fortified positions, disrupt their rear, and achieve victory with minimal casualties and effort.

The Wall Street Translation

Many traders spend their careers trying to fight the market. They try to short strong stocks in a bull market because they think they are "too expensive," or they buy weak stocks in a bear market because they think they are "cheap." This is a direct assault on the fortified positions of the market trend.

Trading Along the Line of Least Resistance

In the financial markets, the trend is the line of least resistance. - The Power of Momentum: When a stock breaks out to all-time highs, there is no overhead supply (no one who bought at a higher price is waiting to sell and break even). The defense is non-existent. The path of least resistance is upward. Buying breakouts to all-time highs is an indirect strategy that aligns you with the path of least resistance. - Avoiding Value Traps: A stock that has been dropping for two years has a mountain of overhead supply. Every time the price bounces, investors who bought at higher prices sell to break even. This constant selling pressure (resistance) makes it extremely difficult for the stock to rise. Do not launch a direct assault against this wall of sellers. - Following Sector Rotation: Capital flows to where it is treated best. If institutional money is flowing into utilities and defensive sectors, do not try to fight it by buying tech. Follow the flow of capital along the path of least resistance.

Actionable Trading Rules

1. Trade Only in the Direction of the Trend: Use the 50-day and 200-day simple moving averages to identify the trend. If the price is below the 200-day SMA, do not buy it. If the price is above the 200-day SMA, do not short it.
2. Buy All-Time High Breakouts: Do not be afraid of buying stocks at new highs. All-time highs mean there are zero trapped sellers above. The resistance is gone.
3. Do Not Fight the Fed: The Federal Reserve controls the ultimate path of liquidity. If the Fed is raising rates, the path of least resistance for the overall market is down. Adjust your portfolio to be defensive.