THE outcome of World War II was determined in large measure by terrain, as much as it was by men and machines. Had the German military been able to take Moscow and push the Soviet forces farther east, it might have given Germany coal, iron ore, aluminum and Soviet weapons factories, far away from allied bombing raids.
The German invasion, code-named Operation Barbarossa, began in June 1941 and by December was over, giving a turning-point defeat for Germany. However, it was not so much that the German armies were defeated by the Soviet forces but that Hitler’s military was unable to adapt to the terrain.
The conventional wisdom is that Germany was defeated by a particularly bitter Russia winter. But the battle was lost long before the first snows. German tanks depended on narrow tracks to provide speed and mobility, and were not suited to the swamps and marsh-like terrain of eastern Russia when the rains came in autumn. The Russians call this season the rasputitsa—literally the “time without roads.” Nothing could be done about the weather, but different tactics could have mitigated its effects.
Sixty-percent of the tanks in the Second Panzer Group were put out of commission by the mud. A division of Fourth Panzer Group, operating during the same period, lost 50 tanks without a shot being fired. Only 10 percent of all the tanks Germany first committed to Operation Barbarossa survived the autumn mud.
Art of War author Sun Tzu wrote, “We may be able to distinguish six kinds of terrain: accessible ground, entangling ground, temporizing ground, narrow passes, precipitous heights, positions at a great distance from the enemy.”
“Ground that can be freely traversed by both sides is called accessible. With ground of this nature, beat the enemy in occupying the raised and sunny spots, and carefully guard your line of supplies.” Accessible ground is the best stock-market “terrain.” Bid and ask spreads are tight. Posting volumes are not too heavily weighted to either side. Support areas—“your line of supplies”—are strong, and resistance and congestion areas are clear but not too heavy. Trading volumes are high enough to allow an easy exit for both profit-taking and cutting losses.
The opposite might be: “With regard to positions at a great distance from the enemy, it is not easy to provoke a battle, and fighting will be to your disadvantage.” Be careful when the spread is too large.
“Entangling ground: From a position of this sort, if the enemy is unprepared, you may sally forth and defeat him. But if the enemy is prepared for your coming, and you fail to defeat him, then, return being impossible, disaster will ensue.” It is always easy to get into a position. But, if volume and liquidity suddenly dries up, you will be stuck in a position that you cannot get out of. Profits only come when you can sell, and if the spread is large or postings are thin, you could be trapped in a position unable to take a profit or to cut a loss.
“When the position is such that neither side will gain by making the first move, it is called temporizing ground, and the situation remains at a deadlock. In a position of this sort, even though the enemy should offer an attractive bait, it will be advisable not to stir forth.”
Every stock trader has encountered “temporizing ground” in the market. The price runs up several fluctuations, and then seemingly out of nowhere comes a huge sell order. No matter how high the posting volume on the bid side might be, the price cannot go higher, until someone is willing to buy a lot of shares at the price of the large “ask.” The fear is that you never know how much more stock might be available at that same price that needs to be bought out.
“With regard to precipitous heights, if you precede your adversary, occupy the raised and sunny spots, and there wait for him to come up. Remember, if the enemy has occupied precipitous heights before you, do not follow him, but retreat and try to entice him away.” I see this as telling us not to be too anxious to hit the ask side when opening a position and be equally anxious to sell into the bid. Patience can gain you a fluctuation or two, and they all add up in the long run.
Machiavelli said this about how important terrain is to success. “The Prince must also learn the nature of the terrain, and he should devote much attention to such activities.” That also applies to the stock market.
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