Sun Tzu's Art of War Chapter 12: Attack by Fire

"Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise, for the result is waste of time and general stagnation." — Sun Tzu

The Military Context

Chapter 12 discusses the use of a volatile, uncontrollable weapon: Fire. To succeed with fire, you must have the wind at your back and the weather must be dry. If the wind changes, the fire will burn you instead. More importantly, Sun Tzu issues a stark warning: if you win a battle but fail to consolidate your gains and secure the victory, you have wasted your time and resources entirely.

The Wall Street Translation

In trading, "Fire" represents explosive external catalysts: earnings reports, Fed announcements, or FDA approvals. These events cause massive volatility. Trading options around earnings is exactly like attacking with fire—it can yield massive returns if the wind is at your back, but the "IV Crush" (Implied Volatility Crush) can burn your capital to the ground in seconds if you miscalculate. Furthermore, Sun Tzu's warning about consolidating gains is the ultimate rule of Taking Profits.

Actionable Trading Rules

1. Check the Wind (Macro Environment): Do not play earnings breakouts (lighting a fire) in a bear market (a rainstorm). A good earnings report in a bear market is often sold off. Only light fires when the broader market is in a strong uptrend.
2. Consolidate Your Gains (Take Profits): If your stock surges 50% on a catalyst, sell half! Lock in the gains. Watching a 50% profit turn into a 10% loss because you were too greedy to sell is what Sun Tzu calls a "waste of time and general stagnation."
3. Never Trade on Anger: "No ruler should put troops into the field merely to gratify his own spleen." Never trade out of FOMO or anger. If you missed a massive run-up, let it go. Do not revenge-trade.