Stock market yin and yang

Fire and water. Light and dark. Chaos and order. Yin and yang.

Along with certain product logos—McDonald’s, Nike, and Mercedes-Benz—other symbols are almost always universally recognized. Think of the Hammer and Sickle, the Heart, and the Yin-Yang.

The yin-yang is called “a concept of dualism, describing how seemingly opposite forces may actually be complementary, interconnected, and interdependent in the natural world.” In the same way, a vibrant free-will political system needs an “Administration” and an “Opposition.”

The “opposites” need each other to bring balance to the universe, whatever “universe” we might be talking about.

However, there is no need for an absolute balance between the forces of “yin” and “yang.” There only needs to be the creation of a balance. There is a great disparity between the actual number of administration supporters and the opposition. Yet, we actually have a relatively silent majority and definitely vocal minority, and that is a good thing. It maintains a balance.

In our personal lives we try to maintain a valid yin-yang. We should “drink moderately.” We tell our children not to drive too fast or stay out too late. We try to achieve a middle ground between the bed is too hard or too soft that Goldilocks struggled with.

The stock market has its own yin-yang and it is not found in the way you might think—buyers and sellers.

Consider your own investment and trading habits. While you do make a decision to buy or not to buy a particular issue, the conflict of yin-yang does not come in at that point. It comes later when you try to make a decision to hold or to sell the stock that you own.

That is the most difficult decision that an investor has to make. I try to simplify it by giving investors this question every market opening as they review their portfolio: “If you did not own XYZ shares, would you buy it today?” That helps investors focus on the dilemma of holding or selling.

Part of the thought process is the problem of thinking that one side of the yin-yang equation is “good” and the other is “bad.” Dark and light. Negative and positive. That may be true in the philosophical concept. But not all decisions are either right or wrong, and certainly not in the stock market. Selling may be the opposite of buying, but selling is certainly not considered negative. While you may take a loss by selling, that is also the way you book a profit. I wonder if people hold losing positions to the depths of hell because they think of selling as a negative thing.

If you think about it, the perfect balance comes when you buy and then sell for a profit.

Maybe the greatest yin-yang thing about the stock market is the balance between greed and fear. We are told not to let our emotions control our investing decisions. Nonsense. “Fear” keeps us alive and out of jail. “Greed” keeps us working harder to get that 75-inch smart television.

In the novel Shibumi by Trevanian, he writes: “A man is happiest when there is a balance between his needs and his possessions. Now, me, I am perfectly capable of being happy with what I have. The problem is getting enough of it in the first place.” And there must be a balance.

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.

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  1. Nice article, I have always appreciated yin yang and its concept of dualism. I think it’s great that two totally opposite forces can be in perfect complementarity.

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