In the stock market, if one could predict a certain trend in advance, it would obviously lead to substantial profits. However, the challenge lies in the uncertainty and irregularity of trends. What appears orderly in hindsight may seem completely chaotic while unfolding.
The regularity of trends in hindsight and their chaotic nature beforehand
In various disciplines, the regularity of physics is quite evident, particularly in classical physics. For instance, Newton's three laws of motion are often highly effective. However, when it comes to astrophysics or quantum physics, these conventional understandings may be transcended.
In the socio-economic domain, however, many trends only exhibit regularity in hindsight. Before or during the occurrence of events, every individual is a factor within the trend, making the perception of the trend less clear. Any prior judgment carries an element of conjecture or probability.
We can learn from history, though whether it proves effective is another matter. What we learn might be one or several factors, but social trends often involve numerous variables. For example, ancient dynasties would study and summarize the experiences of previous regimes. In middle school, we studied Jia Yi’s “On the Faults of Qin,” which reflects the thoughts of early Han dynasty thinkers and statesmen regarding the fall of the Qin dynasty. Such summaries certainly helped the Han dynasty improve social governance, yet the Han dynasty still collapsed. Subsequent dynasties continued learning and summarizing, but they too eventually perished.
The issues we now identify—such as land consolidation and widening wealth gaps leading to intensified social contradictions, resulting in the cyclical pattern of dynastic rise and fall—were known to people at the time. However, in the face of countless micro-level actors, they were often powerless. Those with vested interests consistently sought to protect their personal gains, obstructing any reforms that might harm their interests. Moreover, under the feudal monarchy system, the quality of rulers could not be guaranteed, nor could they be effectively supervised. Monarchs often placed themselves above the law, driven by insatiable power, wishing to rule until death. Emperor Xuanzong of Tang, even during his tenure as Retired Emperor, attempted to oppose his son.
As participants in the stock market, the same principle applies. Even if we continuously summarize past experiences in an attempt to discern patterns in trends, such efforts are, to some extent, futile. This pre-event chaos stems from the reality that we ourselves are part of the trend. When we deduce certain regularities based on past events or similar logic and act according to our perceived 'regularities,' the environment has already changed, rendering the original dynamics potentially obsolete.
Humans possess an instinctive drive to seek regularity.
Although various trends appear chaotic before and during their development, exhibiting highly irregular movement patterns, attempting to navigate volatile markets using fixed rules can easily lead one astray. It resembles the futility of marking a boat to retrieve a lost sword or searching for a horse based on a picture.
Nevertheless, we still tend to search for regularities in trends. This inclination can be considered an inherent human instinct. People naturally abhor uncertainty and prefer relatively stable environments. Once accustomed to a particular lifestyle, they are reluctant to change. In uncertain situations, individuals are more prone to panic. Even those who claim to be adventurers are no exception, as the exploration of new frontiers also stems from humanity’s pursuit of eliminating uncertainty.
In the stock market, people continually attempt to explore fixed rules by analyzing their own and others’ past behaviors or, more explicitly, by directly interpreting historical price movements. They assess K-line patterns, volume-price relationships, information conditions, and other indicators under specific trends.
Specific trends often cannot be easily replicated, and the variables they influence are numerous. The signals we observe are frequently only manifestations, potentially not the primary cause, and may result from a misalignment of cause and effect.
Of course, underlying principles may be relatively stable, such as patterns in human behavior and thought, as well as material and spiritual needs, all of which form the foundation of various economic principles. The more fundamental the influencing factor, the more it exhibits relative stability.
What exhibits relative stability is often the inertia of thought and behavior formed through long-term accumulation. Just as human nature is the result of long-term evolution, personality reflects decades of experience, neither of which can be altered in the short term. Trends often emerge as outcomes of practices based on these characteristics.
Underlying characteristics give rise to what is termed 'momentum,' such as the accumulation of fear or greed, all of which contribute to forming 'momentum,' leading to the logic behind trends.
Grasping trends requires an open-minded attitude.
To seize opportunities within trends, we need an open-minded attitude or, as Zhuangzi said, 'a mind like a mirror that neither welcomes nor resists.' To earn cognitive rewards, our cognition must accurately reflect objective reality, thus requiring us to avoid preconceived notions and biased perspectives that obscure the truth.
Sometimes, our inability to perceive the truth is related to the structure of our senses. For example, when observing objects underwater, we might mistakenly believe they are closer to the surface than they actually are due to the refraction of light, while our visual nerves and brain assume light travels in straight lines. Similarly, hearing can also be unreliable; if we move rapidly toward a sound source, the Doppler effect will make the sound appear higher-pitched. Likewise, in thinking, first impressions often do not reflect the true nature of a matter.
Maintaining an open-minded attitude is not as easy as it sounds. Having preconceptions was originally a way to better adapt to the environment, which indeed helped address challenges during early human civilization when the environment was relatively simple and competition among humans was less intense than it is today. Such ingrained habits of thought, shaped by long-term evolution, are the hardest to overcome.
However, there are some patterns to maintaining openness, such as understanding the principles behind phenomena and thought processes. The more one understands, the easier it becomes to let go. This is an interesting concept: if one knows nothing, they are more likely to be constrained by prejudice, where the first encountered viewpoint exerts a strong influence. As previously mentioned, without knowledge of the laws of refraction, one would have to engage in trial and error, repeatedly failing to spear fish until realizing the need to aim slightly lower.
In the process of letting go of one's preconceptions, consciously trying to let go often proves ineffective because our subconscious tends to resist imposed demands, especially concerning ideas. According to meditation practices, training focused attention helps control thoughts. Emotional volatility and scattered thinking are often closely linked to lapses in concentration.
The various emotions we display in the stock market often stem not only from an insufficient understanding of fundamental principles but also from an overactive imagination. Our attention is frequently diverted to irrelevant information, preventing us from focusing on market signals themselves. This can lead to overinterpretation of specific signals or becoming overly absorbed in the emotions triggered by those signals.
Editor /rice