The Secrets to a Good Business according to Chinese medicine

nils25

 

 

“Get Greedy, fill yourself with Fear, reduce your Hope, don’t regret anything and follow your marked plan then you are ready according to Chinese medicine. Enjoy.”

Nils Volden

Life is filled with activities that involve some kind of trade. That is why it is interesting to look at the development of fear, greed, hope and regret from the perspective of trade psychology within Chinese psychology. The psychological state of the crowd and – person need to be considered when looking into a business or investment. Remember that all problems in a market develop due to a problem with the crowd or in the person. Often we find bubbles and crashes in the market developing from a psychological state of a single person. These people often have problems creating a proper decision or execute their decision. This is why we need to understand that a psychological state is a combination of psychological energy in a person connected to an investment or to a trade decision. We might say that psychological energy is the influence on the process of making an investment or a trading decision in a person. Psychological energy might be compared to our psychic qi and its intimate relation to our mind, Shen. In Chinese medicine it is normal to say that a decision is taken by Shen, but with the help of Zhi and Yi. Let this be our starting point for our quest in the inner dynamics of truth when we have to make a decision.

ChinaStarting to look into markets we will meet two distinct emotions: Fear and Greed. These two emotions haunt all decision making facing a market. Fear is known from Chinese medical literature to be related to kidney zang, and then especially kidney yang states; kidney yin xu and – yang shi. Greed is seldom mentioned (if mentioned) in Chinese medicine literature. Even though greed is considered to be one of the root causes to disease in the context of human interaction. Greed is a pathological factor ricing from Li our congenital essence, causing severe problems. Only when a person is in perfect balance and harmony with others we find an absence of greed. Normally we find greed as a type of solution or even more correctly as an answer to person’s perceived important aspects in the external world. Greed becomes a way to find something we might like, through creating a desire and lust for something, then we try to take it. The main ability of greed is to take from others, not give to others, alcoholism, lust, excessive ambition and theft. Greed is connected to Po and lung zang, then a yang state in lung zang; lung yin xu and yang shi.

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When we trade in a market we try to AVOID listening to emotions like fear and greed, suppressing normal emotions and reactions, natural parts of our psyche and Shen. It is impossible to take away these emotions, and putting them aside constitutes a great risk for future mental problems. Instead we should make them a part of us, integrate them, study how they afflict us, and use this wisdom to make even better decisions. Through allowing our fear and greed to guide our Shen we observe aspects that we normally would not pay attention to, a reality check. A reality check before any important decision is healthy since the base of our decisions is a simple risk and benefit analyze. Our mind have Shen considering the current information from Yi (the mental aspect of spleen zang) and the long term memory assessed in Zhi (the mental aspect of kidney zang), making spleen zang giving us the short time memory and kidney zang the long time memory. Shen will process our information and decide between “do”, “wait” or “do not”. The great problem here are the large crowd directly afflicting our decision making in Shen, and our past decisions flaring up from Zhi giving directions. We need to be aware of the problem of losing important information when we set aside fear and greed. By including an analysis of our internal human factors like Fear and Greed we will make better decisions. Shen only see black and white in what it is presented, and avoid considering the contagious shades of gray. The shades might be perceived as both white and black in Shen, the shades is contagious pathogen factors in your system. The main shades of gray are given to you by the crowd and previous personal experiences. When we start considering the shades we will see a reduction in risk and an increased profit. Do not run from your emotions, listen to them, then you let them go. Use them as a source of information, but not as the ultimate truth.

Diapositiva2Trade is the essence to all civilizations and the reason why people gathered in the first place. We often assume that trade is only rooted in mathematics, but no trade that only focuses on numbers only will work. Numbers is the pitfall number one. Numbers are really just a tiny little detail in the game of trade. Huge abilities in complicated and deep mathematics are not needed. Do not forget the focus on the main goal – profit. Numbers is a good way to count potential profit, but it is not the best way to get it. Profit is connected to many other important aspects than number crunching, but if simple calculations say that it does not exist any potential profit in a business you can be sure that it does not exist money there – move on. At the same time, if the mathematics shows a potential profit in a business, it does not mean that you will get that profit. It does not matter that you have a good product and it exist thousands of potential buyers if nobody buy your product, making it impossible to ignore trade psychology in the search for profit. Chinese psychology tells us to give psychological aspects attention BEFORE you get a problem. Chinese medicine and – psychology is preventative in nature, and to be able to prevent we have to be proactive.

Diapositiva3All fresh traders start with number crunching, accounts and fictive clients to understand the game; some call this paper trade. Slowly they gain some experience in finding patterns, entry – and exit points to do profitable business. It is only one problem, when NO risk is involved, nobody trains the psychological factors. The main psychological factor is the necessity to think independent and to avoid fighting the market momentum. The error is as follows; you might have the best idea, but if you believe too strong in it you might start fighting the market and lose all your money in the process. In the end, it is the market that set the agenda, not you. You might have the best product in the universe, but if nobody wants it you will not sell anything. Market timing is everything, if you think the market is wrongly timed you need to adjust; Christmas trees only sell in December, Skateboards and “Jo-Jo´s” every 5 year or so. The market will always act irrational and unpredictable, just deal with it. The market changes whenever it wants to change, not when you want it to. The ability to follow trends becomes more important than to follow the rational. In short, relax, observe the market and put own feelings aside.

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We have four basic emotions moving around when you make decisions in a market. We have already mentioned Fear from kidney zang and Greed from lung zang. The other two important emotions are Hope and Regret. Regret in Chinese is 后悔 Hòuhuǐ. Houhui means “After repent”. Meaning that this is something you feel AFTER something, and never BEFORE. You might feel regret after you have done something specific. This is not directly sorrow, but another feeling connected to a type of imagination or analysis after a happening. As one of the goals in Shen is to maximize good and minimize bad we find a growth of Houhui when Shen become insecure of its previous judgment as a type of remainder. Shen is only insecure when its psychic qi is deficient, psychic qi xu. Making one of the root causes to regret Shen qi xu due to a psychic qi xu. We also need to remember that when a person suffers the feeling of regret, he will feel a personal failure with some type of negative outcome. Regret is therefore connected to a feeling of imperfection. Chinese philosophy connects the feeling of regret to the moment when you make a mistake that separate you from being a sage, the moment you discover your own short comings. When your eyes opens to your limitations and you see the result. It is normal to connect Houhui (regret) to Lung zang and Po due to the negative view. Chinese psychology tells us that we cannot say that regret is only a lung emotion. Remember that regret will not be sensed if Shen qi is sufficient strong, making regret a combination between Shen and Po. Regret is created in a complex situation, when we have a psychic qi xu, Shen qi xu AND a 反映 Fǎnyìng (mirroring) of Hun in Po followed by thinking. Po will mirror an elevated Hun when Po qi is normal strong. If Po qi is abnormal strong we will find even more mirroring.

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Hope or 希望 Xīwàng indicates that the person hold an optimistic expectation of a positive outcome of something. Here we find two key components of importance, looking forward and positive. Looking forward is related to the Pro personality with its strong future focus and analysis related to outcome of events. Positivity is more related to heart zang. Love, positivity, light and prosperity have an intimate relation to Heart zang and Shen. Pro personalities do not directly hope for anything. They predict the future, scan the outcome of future events, and try to understand what will follow. The focus is not on positive or negative outcome. The focus is on the outcome in the future; the prediction. To hope is more a positively charged mind than a mental mindset on the future and a favorable outcome. Hoping does not require any prediction of the future. The person simply hopes and nothing more, making the Pro personality not being connected to hope. Heart zang is more the happy, positive and accepting way of thinking. Hope in the context of positive focus on a hopefully future event might be seen as a Yang Chenn personality, or a Yang state in Heart zang. Remember that a Heart zang hope is a little naïve. Working in a marked we need to understand the emotions of greed, fear, hope and regret. Only when we understand our own weaknesses we might use them for our good.

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The market consists of individuals that tend to act in a uniform manner as a group; this is individuals like you and me. What really matters is what this group actually thinks and how it acts. All markets have its path or direction; it might change quickly or never. Everybody that enters a market, follow the market stream and try to adjust according to its shifts and turns; making the Tao of the market behaves like a wind. Chinese psychology names a marked as a potential pathogenic factor Wind. This is a wind that is a result of the flexible opinion of the rigid group. If we intend to understand the group and thereby the market we need to follow its path for a time to understand the track. When we have created a type of mental map of the terrain we need to add external factors to predict changes in the future if this or that happens. Wind is irrational in its nature and difficult to read over time. We need to read multiple interconnected subtle clues that depend on everything from nature to its irrational group of individuals.

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Let us take a closer look to the emotions that hunt all the people entering a marked to do trade. The first one that we meet is almost always greed. Greed is as we know related to Po and Lung zang. Greed is the urge to find as much money as possible in the shortest amount of time without considering costs of others. A greedy market has the interest to earn an unrealistic amount of profit in a very short time. The persons that push the limits might suffer of greed. When persons suffer of greed or a Lung yang state we will see them staying too long in a marked, facing the dangers of losing everything they have and will have. When a greedy person should have pulled out he stay, and when he should have entered he stay outside. When stating this mechanism of the greedy you need to remember that profit does not exist BEFORE the business is finish. In a process you might have a little or lot of earnings, but these earnings is not profit. Profit only exists after a business is completed, and not before or during; potential profit only exists as a currency in the greedy. Persons that have problems with the lung system might easier suffer from greed related problems, especially persons with a yang state in lung zang or a Pro personality with a hyperactive mind.

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Fear occurs when we feel pressured to something and – experience our shoulders start tensing. Then fear come as a 防卫 Fángwèi, defense mechanism, to protect us. Fear is a Fang wei protecting our survival with giving us subconscious warning signs of danger. Fear activates when you are fronting of some kind of potential danger. The problem with fear is the modern world, it working as an enemy. When you are doing business you might find fear start flowing in your veins. This is a fear of deciding wrong while doing trade. You need a clear mind to think correctly, then fear come and take over your mental capacity. Never forget that one of the most paralyzing emotions of all is fear. All commonsense temporarily go away, mental chaos enters – panic takes over; mental wind. If you manage to stay calm and overcome your fear, you might discover that the fear saved your from losing everything. The problem is when fear stops you from getting out or getting in to businesses when you should; then fear gives you economical losses. In business men we often find fear sticking after a fearful experience. Fear stick like glue to business men, and follows a business man like a shadow in other businesses. Fear is a mental poison when making a plan of trade. Extreme fear will transform itself to panic at a not given point in time. That is why we need to learn to smell fear in a market. Because when a market goes into panic you need to get out temporally. Then you sit quiet waiting until the panic goes away. A market in panic is completely irrational and totally impossible to understand with logical reasoning. Leave this type of markets alone and do not waste your time even to try to understand it. The market tends to follow the big institutions, and depending on their direction the market will start to move; national companies and strong institutions might create some movement. If you feel fear in the market (because sometimes you will) you have to follow your plan to sell, go away, and wait for the fear to go away. Never forget fear in a market will create a totally unpredictable market. If you are in doubt about something regarding the market it is better for you to get out than to stay. Depending on the situation fear might transform into something stronger and more unpredictable and irrational. The feeling of fear in you might increase to a feeling of terror, horror, dread, or simply a strong fright. If the market does not transform you will. The fear in you is a construct of a yang state in kidney zang. The stronger kidney yang, the easier you will create the emotion fear. If you provoke fear, you might find a yang state in kidney zang starting to contaminate heart zang. First you will find the normal fear, but when it transforms into panic we find that the heart zang start getting involved. In reality this is a change from a Kidney yang state to a Heart yang state. Remember that the heart sends yang to the kidney and the kidney gives yin to the heart. When in fear kidney zang will start consume its yin, and with that you will find a relative increase in kidney yang. At the same time you will find a true increase in heart yang. In other words, a kidney yin xu might create a heart yang shi! You might get a cardiac arrest from fear.

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Hope is both an expectation and desire for a positive outcome in the future. When doing business you need to remember that hope and euphoria is the most dangerous feelings of them all. It makes you totally blind! Chinese psychology states that when Heart yang passes its 度量 Duliang (tolerance) you will get an intertransformation from Yang to Yin (forth yin/ yang law). Making your Shen become incompetente and irrational regarding a theme. In a way your eyes closes – you become 盲 Máng, Blind or short sighted. When you hope for a positive future change you might lose other good trades today (while waiting). That is why you should never ever hope for better days. Greed works in a similar way, but with a different motivation. You got what you got, act accordingly. The essence to the error is this: When for example a stock increases you might wait with selling it to make up for previous losses on the same stock. Suddenly you lose parts of the new increase because you were waiting to long. Remember, the market is illogically, cold, impersonal and impossible to calculate. Never hope for any future gain. Act according to what you know and what you have. The trap of hope is connected to the sensation of happiness when the market start going favorable for you; you start hoping, hope create euphoria and then you go blind. You feel your heart yang increase and thereby also the hope for even better times. The increased activity in Shen makes more hope you auto-generate. Little by little you move toward the danger zone – blinded – Mang.

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Regret is really a disappointment connected to something in the past. Remember and never forget we cannot change the past. Living in 往 Wang (past) to long might create deep problems. We need to be aware of the potential danger in regretting something to hard. Business provides us with only two types regrets lost trades and missed opportunities. When the mind starts living in a state of regret you have created a type of mental virus. Your system is in a state of 着魔 Zháomó, possessed and in great danger as Chinese psychology like to name it. To facilitate the emotion of regret in a person we need three components. First we create a psychic qi xu with some prolonged or strong mental pressure. Then we need to fill Hun with more mental activity; perhaps some worries, dilemmas and some problems. Now you will find the activity in Hun increase. In the moment the activity in Hun surpasses Duliang (the tolerance for normal activity in Hun) we develop Fanying a mirroring in Po. In this very moment we might find an increase in the emotion regret. Regret is Yin, a break, when doing business. In business you need to accept what has happened, evaluate the situation and move on; never regret! Try to avoid regrets from trade; it is difficult to move on to new territories when the mind is stuck in the past, 24/7 evaluating the past will never relax the mind, and it is to beg for suffering to look at old mistakes all the time. Our modern lifestyle moves on, and you got no time to lose; therefore move quickly on to your next opportunity. Never run after old trades and opportunities to make them work, good new markets exist, search them! Find new paths in life. Always calculate the ratio risk/ benefit when searching for profit, and never regret or live in the past. Remember this: Greed creates an internal voice: “How much money will I make if I am right?” Fear creates this internal voice: “How much money will I lose if I am wrong?” Regret creates the following internal voice: “How much money would I have made if I did right?”

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Business makes emotions fly wild in your mind, they are supposed to fly. First you need to accept them and their existence. Then you should try to eliminate their influence. A market is a complex place, and impossible to understand completely, but there is the place of business. In the market place, you are yourself your biggest enemy. Understanding psychology of a market will give you some edge and unique information about what is happening. It works like this: If you aim for a higher outcome you need to accept a higher risk. A higher risk means that you might lose all your investment. All risks include some volatility in its investment. Volatility is periodic, constant variations in value occurring in an investment. Chinese medicine would call this Wind. When you get hard volatility in an investment, your mind will start flying wild and the activity in Hun will strike sky high in record time. The chance for Hun to surpass its Duliang (tolerance level) is strongly present and we should expect a strong Fanying (mirroring) in Po. Besides experiencing a strong uncomfortable fear, increasing regret, we get extreme emotional variations in the emotions. Most visible in times of volatility are an instinctive urge to sell and get out; run with the wind. In moments of extreme emotions you should not consider leaving. Research has shown that following the advices of heated blood often is a bad choice. Stay calm calculate the volatility in your investments in advance, and when they come (because they will) stick to your plan. Do not change your plan when you are in volatility. When your emotions start pulling you around and you feel for starting to trade, then stick to your plan, reason and NEVER follow pure emotions. Follow Shen, not Hun and follow your 计划 Jìhuà plan states Chinese psychology.

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In trade psychology we have many central aspects that we need to be aware of. Let us go through them one by one, and understand their position in Chinese psychology and – medicine. Normally we sum up seven distinct behaviors related aspects that tend to afflict business and trade profoundly. 信心 Xìnxīn (trust heart), confidence, might become over heated and the person ends up as overconfident. Overconfidence is one of seven aspects that play a central role in trade psychology. When you think that a specific trade is more valuable than it actually is you are to be named as overconfident. Do not be confused, in sport it is favorable to think that you will win, but when it comes to a self-centered optimism while doing business you will suffer hard. You cannot think that you will earn, and nobody wants to end up in a personal economic ruin. When you invest your resources in something, you need to do this with a pure mind, meaning that you need to stay clear of your emotions. Guide by reason and not emotions! Let us say that you put an anchor on a specific predicted outcome. From that moment you have a bias for interpreting other information related to this anchor. Remember this predicted outcome does not exist; it is just a mental construct from you. Perhaps it is a good estimate, but it also might be a bad estimate. Anyhow, every time when you do something that has some relation to this anchor you will think about it. Often anchors will disturb your cognition, giving you problems in the anchored situation or in future related situations. Chinese psychology call anchors for potential pathogen factors; they fill your mind as a minefield just waiting for you to step on them. 泊 Bó (anchor) is the word that is normally used to explain anchor in Chinese psychology. Bo creates mental obstacles in Zhi, making Zhi give Shen information that is contaminated or wrongfully constructed. In general people tend to be overconfident regarding their own abilities. Bo is a potential way to Xinxin Shi, overconfidence. Actually most people upgrades them self and downgrades others. When you are under more pressure than normal or after having more success than normal you are more likely to grow an astronomical overconfidence. Since it is impossible to understand the complete instable market, being overconfident is then a great risk. Overconfidence is created by information stored in Zhi combined with a reduction of Qi in Shen. When you get pathologically charged information like a wrong anchor, Bo, you will end up in a mental state where the wrong information creates false mental energies. This false mental energy will contaminate our Shen, and create a Shen qi xu. Suddenly you think you are the king of the world, but in real life you are almost broke and out of business.

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Humans are mammals and mammals tend to exhibit a strong group behavior, making us all a sort of group animals, depending on others to feel well and alive. Being a group animal makes us prone to herd and to group think. The herding instinct make us move around together in group, and it also makes us more likely to make the same decision. You tend to conform to the opinion of the others. A herding instinct is useful for survival during difficult times seen through the glasses of human evolution. Our modern society does not always favor people that copy others. Our place in evolution does not regard herding as an individual asset. Group mentality does exist, and we better accept it, find a way to understand its function and start to coexist with this aspect. The market follows the herd, and 创新 Chuàngxīn innovation starts outside the path of the herd. You need to understand the concept of herding and the depth of our group mentality; irrational as it might occur to you. Our predisposition to live in the mean and to do the same as others emerges from deep inside our congenital essence and Li. We tend to give our complete blessing and uncritical copy what others do, say, think and decides. Humans are pre-programmed for conformity; you live on a type of auto conform-mode. Exactly that is our challenge. In business we need to understand that when others buy or sell is not necessarily a good deal for you to follow. You need to stay clear from following others when doing business. To be blindly herded by others might lead straight to disaster. Chinese psychology considers the group mentality to be directly connected to our congenital essence, making our Shen trying to weigh aspects from the group as more valuable than individuals. What everybody else thinks and does will be perceive as more correct in Shen than what individuals think and do. Shen will give priority to plans with associated information from Zhi with a group signature, making you subconsciously confirmatory.

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Our Yi for absorb our information and passes it on to Hun, Zhi and Shen. Depending on how you received the information you will save it differently. The focus or the signature in the presented information is everything. For example you will perceive it different if a person says you have “a 50% chance to win” and “a 50% chance to lose”. Like me, you prefer to win, don’t you? Rhetorical skills of others are vital when you analyze the given information to make your decisions. Yi send the information both to Hun for planning and to Zhi for storing and future reuse. If interesting enough Hun will create plans related to this new Yi sent information, and if the information is repeated and lasting Zhi will also use it when Shen request additional information. When you are in a Yin state you will put priority on Yin charged information, and in a Yang state you will put priority on Yang charged information. Awareness of your mental state makes you able to analyze the information more correctly. Your congenital essence has conditioned you to be subjective and to read information as served. All interpretation of information happens in Shen. If we have a Shen qi xu or a Chenn personality we will find more errors than normal. An easy trick to avoid subjectivity problems are to write down the information, wait for a time before analyzing it. This simple technique will make you less subjective and clearer in your mind.

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Business often makes us live in the past. Projects that have gone well before tend to be more attractive than new projects. At the same time, we do not like to take risks. If you mix these two factors together you get a bad business man, or perhaps even more correctly an average business man. A business man cannot wait for others to be first. He needs to enter the market as one of the first; the profit is for the first and not for the last. Considering that the last to enter a market will not earn anything major we start to understand that being first will have to involve some risk. A safe bet only surfaces when the market is almost full and satisfied. Do not believe in a good offer, they were good before you heard about it! If you aren’t first in line, you better forget it. If you have lost the run up, then you are only there for the down trip. Nobody sell their best project for free. If you ever feel in doubt act according to this tip, do business in the future and never in the past. Chinese psychology recommend to leave 以往 Yǐwǎng (past) and move on to 未来 Wèilái (future), but to live in 今 Jīn (present). Business that has its base in Yiwang is not likely to be profitable. Business that has its base in Weilai is hard to start, but will prosper. Business that has its base in Jin is better than Yiwang, but you have the risk for a short time profit and long term loss.

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We always search for clues and patterns around our self. Yi absorb information and Shen do quick analysis on it. We use our experiences stored in Zhi to predict the future. A prediction will often conclude that what has happened before will repeat itself in the near future, but this assumption is not true. Remember we are moving around in an illogical market that does not repeat itself that frequent or in a fixed pattern for that sake. Everything functions in a random pattern and non-cyclic. The past might provide some indicators of direction, but no conclusions should be found. The numbers of yesterday is not of today. The charts of last year followed the marked last year, but not this year. Often past confuse more than it helps us. Remember that seasonal variation is not the essence of a market. Christmas trees sells in Christmas and sun cream sells better in the summer. Season variations is not the same as the market as a hole. Be careful when entering Yiwang, the past. When a person start thinking about past is the same as the future we find a development of rules that might turn into Gai (a wishful thinking). Gai is what a person deep inside wishes. If a person wish to understand the market based on the market yesterday he is developing Gai with its root in Yiwang (past). In a Casino you find many lose their homes due to this way of thinking. The Valence effect is the tendency to overestimate the possibility for good things to happen. When a person is emotionally psyched up he will have a more positive valence than negative, making him prone to believe stronger; clues transforms into mental reality for this person. This type of futuristic wishful thinking is connected to Yi. Telling us that I personalities and problems with spleen zang will more often create this type of errors. A positive Valence is Shen connected and the negative Po connected. Gai consist of four stages: Mènghuàn (dream) stage, Cuòzhé (setback) stage, Shībài (defeat) stage and Sǐxīn (reality). Here we find the intimate connection with Yi-Po and Yi-Shen. The border between fantasy and reality is a narrow path. Identify traits of fantasy are normally connected to the detection of fantastic elements in a self-coherent setting. The fantastic elements are filled with inspiration from the past with an irrational taste of the past remains as a consistent theme. This structure makes the fantastical element present. Fantasy follows rules of its own inventor; allowing elements like false negativity and – positivity exist side by side, past become future and internally cohesive.

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Let us admit it, humans (thereby us) are really strange by nature, relatively predictable irrational, and often we do not understand our self (if ever). We react stronger to a financial loss than to a financial gain. Clearly, negativity frightens us more than positivity. The possibility of loss might create a suffering for future loss. An investor suffering from loss aversion will be rigid and conservative. He will be anything else than prospective. When facing dark times we tend to paint the world even darker and start thinking extensively, creating an elevated activity in Hun. When the activity in Hun starts to increase we find the chance for Fanying (mirroring) to increase, well mixed with the common symptoms from liver zang as frustrations, irritability and aggression. It is also common to suffer from aversion of selling bad investments. The root of this aversion is in reality connected to an aversion against realizing an economical loss. If you do not sell you might still recuperate the relative loss. When you sell it is no way back, the loss is then realized. We try to avoid loss; making us prone to not do things that would accept a loss. Just remember how many people stay put in bad businesses, how many stay with a partner that abuses them, and all the people just waiting for something that will never happen. We simply try to avoid loss as long as possible. This ability to not accept loss is normally associated with Po in Chinese psychology.

An interesting aspect in the mind is our tendency to connect success to internal characteristics and failures to external factors. You are personally responsible for your success and the market responsible for your failures. Making us take credit for everything possible, and push failures on others. This is a subconscious mechanism that lies in our congenital essence. We might find more of this aspect in Pro personalities and in situations where Hun mirrors itself in Po. A sad truth is that everything is normally reverse; the market is often responsible for your successes and you for your failures. We need to understand that competence is not necessarily the key to success or the only key to success. A favorable market is the key. To be in the right business at the right time is everything. It does not make you more smart or competent than the others if you by accident happened to be at the right place at the right time. If you lose in your business, then you need to revise your strategy for possible mistakes and flaws, because the market is stable irrational and ever changing. Chinese psychology holds that the branches (Biao) are easy to see, but the problem is frequently located in the root (Ben). Nei (internal) reason often creates situations where we easily examine Wai (external) for Ben.

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Many still believe that studies, education and higher degrees are the gate to money in business. They could not be more wrong. Well, some education is of course needed, but it exist a limit. When you pass that limit you easily become blinded by your own self confidence and ignorance. As we have seen, number crunching is just a minor part of doing business, while psychology plays a major part. We should never become too calculating or too confident in a business. Education tends to create an illusion of security; to be an egghead is not a good thing in business. When the ego has grown sufficiently high it will fall. Then the chance is big for the person to blame external factors, because we tend to, right? In the end it is about a type of general gut feeling and to be at the right place at the right time.

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When you open your business you have to remember that this is your business. Since it is your business it should follow your way of thinking, your philosophy. That is why you have to develop a set of limits and rules that you follow when doing trade. This is your way to manage tolerance and your way to control emotions. If others decide, it will not work for you when it starts to heat up; you are different from them. That is why you should get out of the herd and trade alone.

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Never forget the cycle of emotions in business. First you get optimistic and start to excite. You feel that it start working. You made this yourself and it is perfect. Then you change into a feeling of thrill and euphoria. You are the champion of the world. This is the worst time to enter a business, since from here it just goes down. Slowly we find an anxiety enters as the market start going down and you go into denial thinking this is just temporal. It is for an ignorant really difficult to understand that nobody want to buy a Christmas tree the 26th of December. But it is not just temporal. As your mind see the curve continuing down you feel the fear increasing exponentially and fear start to transform to panic. When you have been on the top you need to accept that from there it just goes down. As you slowly start to understand that this is not getting better you capitulate and enters despondency and depression. Many feel this as a time of total darkness. This is the best time to enter a business, because from here it only goes up. You start to get a hope of something, a hope that slowly transforms to a sensation of relief and optimism. Then the cycle starts again.

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Chinese psychology states that psychic qi might be seen as an eggshell. The eggshell protects the inside of the egg through its hardness. Imagine that the toughness of the eggshell is the psychic qi. Inside the egg you have a transparent part, the albumin, and a yellow part, the yolk. The albumin might be seen as your proper defense mechanisms or Wei qi. The yolk is the nutrients in the egg. This might be seen as your Xue (blood), and the Zang fu organs. External factors are touching the eggshell, and the shell is protecting the body. The external factor here is the market. Through its unpredictable changes it might be seen as a pathogenic factor, Wind. Depending on the strength of the psychic qi we might manage to withstand the Wind or not. When the eggshell breaks emotions start emerging. A weak psychic qi will make the body and mind withstand less. If the wind penetrates we will change. First we will find an increased activity in Hun. This activity will continue to increase until it has reached its Duliang (tolerance). When Duliang is reached we will find a Fanying (mirroring). A Fanying is when an elevated activity in Hun start storing mental energy in the physical body. You might see this as a psychosomatic mechanism. When it starts to heat up around a person we will find him experience irritability, frustration and aggression as it heats up in liver zang and Hun. When the limit of tolerance is reached and the mirroring begin we find the emotional alarm start ringing. He will experience Fear. This is a fear that warns him against multiple factors; sell, buy, run, hide or whatever. In a market that acts as a pathogenic factor Wind we will also find three other emotions Hope, Greed and Regret. According to the situation and strength of the psychic qi we will understand the emotion. The person needs to identify the emotion and not follow it directly. In the midst of this we also observe that the conception of time dangerously start transforming. Yǐwǎng (past) change place with Wèilái (future), Past become future. Suddenly the person starts to believe in his abilities of predicting the future.

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The person will perceive the market as wind through his Yi. Yi will send its information to Hun, but repeated and long lasting information will be directly stored in Zhi. Zhi is the root of fear. Hun produces planes that are sent to Shen for further processing. Then we see Hun start filling up and Duliang will sooner or later be passed by Huns activity. In the end everything depends on three factors: the ability in Yi to absorb information, the planning in Hun and the speed in the decision making in Shen. Less wind and Yi relaxes. Less information from Yi to Hun and Hun reduces its activity. A quick activity in decision making in Shen and psychic qi will not accumulate in the system. When Duliang in Hun is passed we will get a Fanying (mirroring). With a Fanying, Po is involved and multiple market related symptoms emerge like stronger fear, greed, hope and regret.

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How to manage this? Well, first we need to handle the market well, meaning through strategies and accepting the presence of emotions. Accepting emotions is not the same as following the emotions. First step is to understand the root, the market as wind. To reduce the wind we might start with introducing “do and don’ts”. Still we need to be aware of the factors mentioned above and act accordingly. In Chinese psychology we have a stress therapy called Expel Wind. It is three acupuncture points that are used to eliminate this type of psychological wind as the market repressent. First you put Fengchi (Wind pool) GB20. Then you put Fengshi (Wind market) UB12, and finally you put Fengmen (Wind gate)/ Fengfu (Wind mansion) DU16. Remember you need to put the needles in exactly this order. This will make the psychic qi stronger to withstand wind. Sometimes you might apply moxa or heater lamp on the points. To strengthen the psychic qi we need to consider different aspects. It is many ways to do it, but one of the most common ways are Moxa or heating lamp on Mingmen (life gate) DU4 for 15 min. Then you put Yishe (Reflection abode) UB49, Hunmen (Hun gate) UB47, Pohu (Po door) UB42 and Zhishi (Will chamber) UB52. The last needle goes in Shenmen (Spirit gate) H7. In persons that live under strong external factors this points will work to reset the nervous system. Examples on strong external factors might be a pulsating market, a stressing job or problems with a sick family member.

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Bottom line
Everything is about sticking to your trading plan. Your trading plan need to be both complex – and simple enough to execute when the head starts to get infected by emotions. When you enter a business or the market you will have an entry point. You should not move you “stop loss points” from what you decided you entered the business. You have to move the loss point it needs to be connected to your profit. Chinese psychology recommends you to control your emotions through rigid predefined rules in your trading plan. Meaning decide how much you want to risk and then you follow this rule. Do not make to complicated or flexible rules! The worst enemy is you and self-sabotage. Control yourself! Trading psychology is all about understanding emotions and controlling Fear. A trader that overreacts when confronting fear will fall into problems. Another important clue is Greed. Everybody have an instinct to try to do better. In trade you need to use your greed to move forward, but you need to know that greed is a potential danger. Stick to our trading plan. Good luck!

nils8

The writer of this article gives seminars in Chinese medicine and Chinese psychology all over the world! Go to this page to find out how.

https://chinpsy.com/seminar

Literature
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• Bernardo, Antonio and Welch, I. (1998): On the evolution of overconfidence and entrepreneurs, UCLA Working Paper #9–97.
• Budd, S. (1992): Traditional Chinese Medicine in obstetrics. Midwives Chronicle 105 (1253): 140-143.
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• Navin, C., Lakonishok, J. and Ritter J.R. (1992): Measuring abnormal performance: Do stocks overreact?, Journal of Financial Economics 31, 235–268.
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