How yoga can help you to make money in Stock market!

How yoga help to make money in stock market

 

As legendary warren Buffett said

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1” 

It is hard to obey Rule no 2! Isn’t it! 

The father of modern investment theories Benjamin Graham who was also investment guru of Warren buffet provided definition of investment as “ “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

We met an investor last month who is investing in Indian Stock market. He is young and highly educated and knows basic investment fundamentals. He is doing remarkable investment decisions in Indian stock market which are highly unpredictable and he is making handsome and wonderful returns. 

Generally speaking in investment if your return from investment is quire higher than Sovereign Government bond  (which stood at nearly 5%) OR Bank interest rate (which is stood at nearly 6%) then your investment is a good decision and anything good than this then it is wonderful.  

He is achieving a return of 6% to 7% monthly! It means yearly he is achieving 60% to 70% return! 

This is just an insane return. We never see returns like this. We were thrilled to know him better and hence we dug deeper into his mind! 

Out of our surprises, he mentioned that stock market investment is all about mind and emotions rather than just numbers, fundamentals and business of the company! 

He has rightly said and one of the greatest investors Warren buffet also said: “’fearful when others are greedy, and greedy when others are fearful.”

He controls the emotions: Fear & Greed and makes good returns in stock market.

How is the stock market related to human emotions? 

The stock market is driven by human emotions. It reacts to fear and greed of the investor. Though there are fancy financial methods, analysis and models are benign studies in best management school to invest, a mediocre and retail investor always invest based on news, friend’s and stock broker’s advice, rally of particular stock and other factors. And hence at the end of the day that investor is looser! 

Fear of losing money gives the bearish market and prices tends to down and greed of making money  gives the bullish market and prices goes up. 

Fear triggers the selling of the stock in the form of investment and greed triggers the buying of the stock in form of investment. 

Stock market prices and indexes ups and downs are the result of supply and demand of the stock. When there is more demand than supply then it goes up and the reverse of it causes down in price. 

But the question is, When the demand goes up? The simple answer is when the company’s stock is in demand and supply is less, it means those who hold the stock do not want to sell and those who want to buy do not get proper supply.

Well, this looks simple but it never has a crystal clear roadmap to achieve this! Otherwise every person would be a millionaire on the dalal street! (Bomaby stock exchange’s nickname) 

You would get a general idea of how fear and greed shapes the stock market. 

The Science of FEAR

Now, let us understand where fear and greed resides in the mind.

What part of the brain causes FEAR in the human? 

The answer is Amygdala

Fear is a fundamental emotion! It is basic and necessary for human lives. From the ages, I mean from the era of pre-home sapience and beyond that fear plays an important role in shaping human lives, without fear we could not reach the modern human lifestyle! 

Fear is vital and required, mother protects her child via sense of fear, in old age due to fear of animal attacks they made defence mechanisms, and so on. 

What happens to your brian  when Prices of Stock fall

When price is triggered to fall, you have a sense of fear. During the panic period  in the stock market amygdala takes control and sends the signals to other body parts like heart & muscles and messages to react accordingly. Here I wrote what happens to the brain when stock price decreases, just check in below steps. 

  • Price fall sends a signal to Thalamus’ part of the brian, it is like a receptor of outside events.
  • Based on the event it triggers the other part of brain, on fear part which is stored in your brain as pattern switch amygdala to respond 
  • Amygdala sends a message to Hypothalamus which acts as a steering wheel of the brain. It sends the fear signal to the sympathetic nervous system. 
  • Sympathetic nervous system is responsible for increased heart rate and increased breath rate. 
  • Hence, Fallen prices cause fear in the form of increased heart and breath rate

The Science of GREED! 

The financial crisis of the year 2008 having roots into greed, At that time a very large bank of the US’s CEo Said “ We can’t control greed!” 

Let us understand what is actually greed and how it is born in our brain. 

Greed begins in the neurochemistry of the brain. Greed is fueled by the Dopamine of the brain! 

Dopamine is a type of  neurotransmitter or it is called a feel good transmitter.

It floods when there is a feeling of pleasure like huge profit in the stock market!  Dopamine is produced in the ventral tegmental area,substantia nigra and hypothalamus of the brain.

Dopamine is activated on an experience that we had not before! It means for example you earned Rs 5000 from the stock market before and currently you are earning Rs 5000 again then dopamine shall not increase but If you are earning Rs 10000 then dopamine will be emerged. 

Hence, your brain is chasing for elusive higher highs!  

Chasing more is Greed =  It will increase dopamine

Increasing dopamine = Drugs!  

Hence, Greed = Dopamine = Drugs! 

The Roots of Financial Failure – Fear & Greed! 

I have walked through with fear and greed technically. What happens chemically to your brain when fear and greeds grips your brain. 

It is traditionally said in our ancient way of living that greed is the root of all evils and it is truly a very practical wisdom from our ancestors. 2

Let’s take a case: 

  • Let say you have BUY 1000  Stocks at Rs 100 per stock hence total investment of Rs 1,00,000.
  • One day that stock decreases to Rs 90, at this moment you shall be in fear but you would think for its rise and wait! (mix feelings of greed and fear).
  • Then stock would increase to Rs 120 and you would again think that it would increase more and you hold the stock (Result of greed).
  • Stock goes to Rs 80 and you would be in fear again and sense of frustration  and waiting for an increase! 
  • If you are lucky then stock would go to Rs 105 in this moment you shall sell the stock! Right? (Because you had troma of fear and greed and hence you are now looking for security and want to be safe) 
  • And then stock would again increase to Rs 130!  Again frustration! 

Result is: you get a very low return of the stock! Just Rs 5!

Reason is : You are not managing your fear and greed,isn’t it? 

This is the standard pattern you would observe all the time on the stock market among the traders and investors, Right?

What’s the solution? – To control Fear and Greed, right? 

Can yoga help to control fear and greed?  Does meditation helps to control fear and greed? 

If yoga can give impact on the brain’s amygdala and hypothalamus then it could be possible to control fear and greed but can yoga have an effect on the brain? 

The answer is: yes, Yoga does have an impact on your brain. 

How yoga can help you to control Fear and greed? 

There are several researches on yoga’s impact on the brain. Researches suggest that there is a significant impact on the brain due to yoga and meditation. 

Your Fear can be well managed,  if amygdala would be in balance and less activated in your brain. If amygdala is more active then there are emotional mood swings in person. Stress reduction has close association with less amygdala volume.

But how to control amygdala? Any technique? 

Fear producer amygdala has been less activated after 8 weeks of meditation practices according to research.  

Do Deep breathing for reducing fear: 

You have to do this on regular basis, it means on daily or 4 times in a week you have to do the following technique. 

  • Sit in a crossed leg OR Padmasana, whichever is comfortable for you.
  • Keep your spinal cord straight. 
  • Keep your head straight. 
  • Put one hand on chest and one hand on your stomach
  • Now do breathing such that, on inhalation your chest and stomach must come outside, and on exhalation they must go inside (normal position)
  • Inhale for 5 seconds and exhale for 5 seconds.
  • Repeat above with 30 breaths. 
  • Now you can put both your hand on your knee and continue breathing. 
  • Do it again for 30 breaths. 

After 8 weeks of time (if you do daily) then you will notice there will be significant improvements on balancing your emotions. 

Just see what happen when you do deep breathing 

Deep breathing & Brain

Courtesy: Ram Vala, www.voiceofyogi.com

How to control Greed by yoga and meditation? 

Opposite of Greed is ‘aparigraha’, mentioned as 5th Yam in patanjali yoga sutra. Hence, it is important for yogis to become aparigraha. 

But the problem is how to control greed OR remove greed from the brain. 

As mentioned earlier, greed is associated with dopamine. Dopamine is released when pressure increases. We need to control dopamine and do not need to decrease the release of the dopamine. 

But how to control dopamine releases, 

According to research on ‘Anulom vilom pranayam’, daily 20 minutes of doing Anulom vilom pranayama (however it is mentioned as shatkriya OR purification method) creates a sense of fulfillment and satisfaction  in life. 

We are not yogis so we do not need to attain Aparigraha! But we can gain a sense of satisfaction. Satisfaction is a medicine to overcome greed. 

You can visit this wonderful video to do anulom vilom  pranayam- https://www.youtube.com/watch?v=SW3o9Lhfngw&t=271s

 

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