What can a Chinese general from 500 BC teach you about active investing and trading?

Quite a bit, if we're talking about Sun Tzu, the author of the famous book The Art of War.

The Art of War has often been applied as lessons on how you can get ahead at work and in the business world -- but it also can be applied to 'battling' the markets in search of outperformance.

There are many great principles in Sun Tzu's writings.Here are few examples of his timeless wisdom applied to trading, some paraphrased to modern thinking:

"He will win who knows when to fight and when not to fight."

You don't always need to be fully invested.Pick the best times and places to enter into positions, and when to avoid or back down from allocations.Also, this applies to if a position goes the wrong way, you generally don't want to fight the market if things don't go as planned.

"The general who wins a battle makes many calculations in his temple before the battle is fought.The general who loses a battle makes but few calculations beforehand."

For investing, this can mean don't make trades on a whim or an impulse without preparing in advance.Always have a rationale for entering a position, a game plan for taking profits and for closing down losers.   Do your research and develop a process before entering a new position.One example is to live paper-trade a strategy before trading it with real money, and also to analyze past trades to see what works and what lessons can be learned.

"Treat your men as you would your own beloved son and they will follow you into the deepest valley."

Your dollars, your money, are your soldiers.Soldiers are a limited supply.Send them into battle in the markets only when you have confidence that they will succeed and conquer/multiply -- when you see the probabilities are in your favor and there is an edge to be gained.Don't chase good money after bad, or after lost hopes, out of stubbornness.

"Be like water.Water shapes its course according to the nature of the ground over which its flows."

Don't be a perma-bull or bear on anything.Different sectors in the markets can be strong outperformers at different times.Be flexible to trading a variety of securities and even in both directions.Additionally, a market can be trending upwards, downwards, or in a choppy sideways trading range -- water flows differently, depending on its surroundings -- use different strategies or tweak techniques to what is working in the market currently.

"Use local guides and neighboring princes to gain familiarity with the pitfalls and natural advantages of uncertain terrain."

You don't know everything about everything.Always be open to learning new techniques and trading strategies.Utilize the knowledge of the experienced and experts to increase the probability of success when foraying into the tricky waters of the markets.

"It is a military axiom not to advance uphill against the enemy, nor to oppose him when he comes downhill."

Don't fight the trend; an object in motion is likely to stay in motion.Take the path of least resistance that has a high probability of success.A falling knife will do the most damage, avoid trying to catch them.

"Advance without coveting fame and retreat without fearing disgrace.Have your only thought be to protect the country and do good service for the sovereign."

Gaining profits over the long-term is the main goal in investing of any sort.Don't trade just to feed the ego and prove that you are smarter than the markets.Be willing to cut losses when the market tells you that a particular investment has gone awry.View a losing trade as a learning experience, rather than any kind of personal affront.

"The control of a large force is the same principle as the control of a few men -- it is merely a question of dividing up their numbers."

Whether you are a large or small investor, those dollar soldiers matter.Similar strategies can be applied regardless of account size.Use position sizing and systemized rules to avoid having too much at stake in any one investment.One rule of thumb is 'sleep at night' - if a particular position is too large or too risky for you to sleep well at night, because you are thinking about if it goes wrong, you should probably pare it down or close it out.

This is just a taste of some of the interesting and useful knowledge put forth by Sun-Tzu over 2000 years ago, that still applies today.