[Red Envelope] Hundredfold Brother reads Chapter 36 of the "Tao Te Ching": Understand the rise and fall, and you are the wise person of the market

Take a moment to calm your mind and recite the Tao Te Ching (“Daodejing”) again and again. Once you’ve read it enough times, you’ll slowly be able to feel its unique charm. The language of this classic work is actually especially graceful. As you read it, it rolls off the tongue easily, and between the lines it’s full of rhythm and tempo. Although the text appears brief, it also contains countless philosophies and profound reflections. The more you savor it, the more it tastes like something real.

When I first came across it, I actually didn’t like this kind of way of expressing things. I felt the words in the book were too hollow and indistinct. What it talked about couldn’t be seen or touched. It felt like “talking about nothing”—purely metaphysical principles detached from reality. I thought it was far less practical than writing that explains specific methods and techniques. So at the beginning, I found it hard to empathize and even harder to truly understand the deeper meaning within it.

Later, after experiencing many things—through twists and turns in life, at work, or while doing things—I had, after a kind of “hundred battles,” a different kind of insight when I looked back and sorted out the path I’d taken. When I summarized the experiences and lessons along the way, it suddenly gave me a new understanding.

Those specific moves and hands-on methods I once valued actually all have limits that apply to certain situations. After the passage of time and changes in circumstances, even though they’re still important, there isn’t much reason to keep bringing them up repeatedly. Instead, it was the “hollowness” and metaphysical principles in the Tao Te Ching that became the kind of content that can guide direction—something worth pondering again and again.

The teacher said you still need to study some metaphysical things.

Alright—after these reflections, let’s continue talking.

Chapter Thirty-Six Original Text

When you would draw it in, you must first tighten it;
When you would weaken it, you must first strengthen it;
When you would destroy it, you must first raise it up;
When you would take it, you must first give to it.
This is called subtle radiance;
the soft and weak overcome the hard and strong.
Fish cannot do without the abyss;
the useful weapon of a state should not be shown to others.

In the previous chapter, we talked about holding the great image—when the world moves on, peace and stability follow—and we discussed that in investing you must hold onto the fundamental “Tao,” staying away from short-term temptations. The steady, plain, simple principles are the source of profit that can never be exhausted.

In Chapter Thirty-Six, Laozi lays bare the cycle of market rises and falls, the logic of positioning by the main force, and the wisdom of seizing the edge before a trade. This chapter is a set of techniques for investing judgment of turning points: to戒 greed and戒 impatience, to take retreat as advancement, and to hide your sharpness to preserve your life. Once you understand the cycle of yin and yang, you understand half of the market’s secrets.

I. When you would draw it in, you must first tighten it;

If you want it to gather and close, you must first make it expand and open.

If you want it to gather, to fall, and to crash, you must make it expand to the extreme—frenziedly pull it up—until it rallies so high that everyone loses their rationality.

Placed in investment, this is the core law of when the market tops out, and the underlying logic of the main force luring people to chase and then dumping. Before a big drop, the market often first surges wildly. Before a trend reverses, it often first spikes to the highest point.

The more the market jumps and the more the trading screen boils— the more it’s full-scale and everyone is partying— the more people discuss stocks, the more everyone calls it a bull market, and “stock gods” show up everywhere. The more you “tighten it” to the utmost, the closer you are to “drawing it in”—meaning the big fall, the pullback, the crash.

After a quantitative uptrend’s high point forms, the price may not drop immediately. Sometimes it may even turn back upward again for a short period, or consolidate. But as long as that quantitative high point has formed, the experts won’t chase the very last segment of the rally. Not taking the very last baton—this is precisely because they’ve understood the heavenly cycle of “tightening to the extreme, then drawing it in; when flourishing reaches its peak, it must be brought to an end.”

Don’t be misled by the outward madness of excessive expansion. Hold your own trading rules, control your impulse to chase at highs—only then can you avoid the pit of taking bags at high levels, and the deep trap of being stuck for a long time, and protect the profits you made during the bull market.

II. When you would weaken it, you must first strengthen it;

If you want to weaken it, you must first make it grow strong.

In the market, there has never been an endless “strong trend,” and there has never been a stock that only goes up forever. When a sector, or a specific stock, becomes so strong that it ignores bad news, and the stock price rises far away from fundamentals—when market sentiment becomes so wild that everyone is daring enough to chase at higher prices—that is precisely the warning sign that it’s about to start turning weaker.

When it becomes strong to the extreme, the internal downward force quietly accumulates. When it becomes盛 to the peak, the signals of reversal quietly appear. The main force often borrows this extreme “strength” to quietly distribute shares to those retail traders chasing highs. And retail traders are precisely misled by this fake strength, going all-in at the highest point.

The losses of many fearless but ignorant traders often have their root right here: they can’t judge that the short-term peak of a strongly rising trend is precisely taking the “extreme strength” as “eternal strength,” chasing higher and adding positions and going all-in at the strongest point. They don’t realize the market is about to begin “weakening it”—and once that happens, it can take years to unwind.

If you understand that “extreme strength is followed by weakness,” you won’t be fooled by the surface price action. Hold your trading rules, don’t be extreme, and don’t blindly follow—only then can you protect your principal and profits when the market is acting crazy.

III. When you would destroy it, you must first raise it up;

If you want to wipe it out completely—chaos everywhere, never able to rise again—you must raise it to the heavens, make it overexcited, and疯狂炒作 until it’s so hot that nobody doesn’t know it.

Those trash themes without performance support, short-term hot spots without underlying logic— bubble-concept stocks that the media and so-called big Vs hype up to the sky. The more they’re疯狂炒作, the more they pull out limit-up rallies and turn it into a myth. If “rising” reaches its peak, then the speed at which it collapses will be even faster—and the fall will be even worse.

When it rises to the extreme, that’s the beginning of being destroyed. The higher you prop it up, the harder it will crash. The main force’s distribution for exiting always happens quietly when things are at the most flourishing and lively—when everyone feels it can still go up. And retail traders’ losses often start at the most疯狂, the most “on top of themselves”—when they think they’ll never get another chance if they miss it—so they violate the rules and charge in crazily to take the bags.

This isn’t to say you absolutely can’t touch themes and hot spots. It isn’t to say you absolutely can’t do short-term trades. It’s saying you must be clear about whether you can. You need to know you’re playing short-term games, not long-term trend investing. You must have your own rules for short-term operations and your rules for taking profit and stopping losses. You absolutely cannot treat short-term hot-spot炒作 as long-term trend investing. You can’t take trash stocks as treasures. You can’t turn short-term trades into long-term positions.

Laozi’s words are the most direct warning to everyone who has no trading rules, doesn’t understand short-term game trading, yet likes chasing hot spots,炒 concepts, and believing in bubbles.

IV. When you would take it, you must first give to it.

If you want to obtain something, you must first give; if you want to make profit, you must first pay.

If you want to get cheap shares at the bottom, you need to “give” your patience—endure short-term consolidation and washing out, instead of chasing rallies and selling off into drops every day.

If you want to capture the big profit of the main upswing, you need to “give” your steadiness—accept the brief pullbacks and drawdowns in the middle, instead of running the moment you make a little.

If you want to protect your principal and achieve steady, consistent profitability, you need to “give” your greed—give up the temptation of overnight riches, and stick to your own competency circle and trading rules.

If you want to survive in the market for the long term, you need to “give” your reverence—work hard to learn and think, instead of being foolish and arrogant, stubbornly pushing one track all the way to the end.

People who always think only of taking without giving, only wanting to earn and not wanting to lose, who can’t tolerate even a small drawdown and don’t want to put in any patience—will never be able to do investment well, and they won’t be able to do anything well. Greed and fear in human nature, stinginess and fear of missing out on a loss— in the stock market, they’ll be amplified endlessly, and in the end they’ll only end up losing even worse.

How much patience, how much reverence, and how many rules we’re willing to give to the market—the market will reward us with exactly that much wealth, that much stability, and that much long-lasting peace.

V. This is called subtle radiance; the soft and weak overcome the hard and strong.

These above rules for the cycle of rises and falls are the “subtle radiance”—a subtle and masterful foresight. They may seem hard to grasp at first, but in fact they allow you to see through market turning points and foresee where行情 is headed. Laozi’s final conclusion for all traders is only five words: the soft and weak overcome the hard and strong.

The “soft and weak” here is never about being incompetent or helpless. It means obeying laws and sticking to rules, and adhering to risk control—to follow the trend, without acting impulsively, without trying to show off strength, and without treating the market as an enemy. And the “hard and strong” here is never truly real strength. It’s aggressive arrogance, using leverage, going all-in, chasing at highs to bet on the top, and picking bottoms against the trend—fighting the market, believing oneself to be right, and spawning delusions.

In this market, the first to fall are always the ones who insist on showing strength and competing. The ones who gamble against the trend blow up the fastest and liquidate. Only those who know how to preserve weakness and follow the rules can live long through the bull-bear cycles. The aggressive and rash ones— even if they’ve made money 100 times—one mistake will be completely反噬 by the market. And only those who quietly follow the rules can smile to the end step by step.

The essence of “soft and weak” is to align with the Tao of Heaven, align with the market, and align with the rules. The essence of “hard and strong” is to oppose the rules, to move with delusion. Those who follow market laws will win; those who oppose the market will eventually lose.

VI. Fish cannot do without the abyss;

A fish cannot leave the abyss it depends on to survive; once it leaves the abyss, it dies without question.

Put into investing, the fish is our principal—our shares that allow us to survive in the market. The abyss is our trading system: operating rules, risk-control bottom lines, and our competency circle.

The abyss is position control, operating standards, risk-control rules, and the competency circle. No leverage, no all-in, no betting your life, and no going against the trend.

Your principal can never deviate from this safe “abyss.” Once you stray from your own trading rules, break your risk-control bottom line, add leverage, go all-in, and go touch assets you don’t understand at all—you’re effectively pulling the fish out of the abyss onto the shore, placing yourself under a wall of danger. Even with just one mistake, it could lead to irreversible ruin, and you may never find your way back.

Hold the abyss to hold the fish; hold the rules to hold wealth. Live long in the market.

VII. The useful weapon of a state should not be shown to others.

The state’s most core weapon should never be displayed to others lightly;
the trader’s most core weapon should never be flaunted openly.

Here, “weapon” refers to our trading system polished through countless iterations and validated across countless bull and bear cycles. It refers to our core stock-picking logic, our position allocation strategy, and our take-profit and stop-loss rules—our trading methods and profit code that we’ve figured out through grinding in the market.

Our ancestors already said: “The law is not taught lightly, the Way is not sold cheaply; a teacher is not taken along one’s route, and a doctor is not knocked on one’s door.” These core things that make us money are not something others will teach us easily, and we shouldn’t teach them to others easily either. This isn’t “keeping things secret” for selfishness; it’s that the Way should be passed to people with affinity—those who can understand, believe, and keep it. If you give it to people casually, not only will they not believe it, but it may also invite controversy and even bring trouble.

There’s another way to interpret this sentence: for large capital. Whether it’s the way capital positions and allocates, or our own core trading plan, it cannot be disclosed to the outside lightly. Once your trump card is seen through by others, they’ll come for you with targeted attacks. What was supposed to make money may end up being a complete loss.

Chapter Thirty-Six is the investing cycle rule, the turning-point prediction, the mindset of retreating to advance, and the technique for hiding your edge to preserve your life.

The market always repeats in cycles, and rises and falls always switch between yin and yang. When you understand the heavenly way of “when strength reaches its extreme, it must become weak; when flourishing reaches its peak, it must decline”—and you act on “give first, then take,” holding onto softness and weakness, holding onto rules, holding onto regulations, and holding onto your own original intention—then we can always stand in an invincible position through the bull-bear cycles in China A-shares.

In the next chapter, Laozi will teach us that the Way is always of “non-action yet nothing is left undone,” telling us what the highest level of investing truly is. It’s not messing around every day or trading frequently. It’s not acting recklessly or moving blindly—it’s going with the trend and winning without having to fight.