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Leek Thinking Framework — Reverse Investment Decision Support System

Skill Overview

A leek-thinking identification and reverse-investment framework based on behavioral finance theory. It helps investors recognize seven major cognitive biases, build five decision heuristics, and avoid emotion-driven decisions through systematic self-audits.

Suitable Scenarios

1. Self-Reflection and Behavioral Improvement

When you want to determine whether you have “buying after price increases and selling after drops,” “selling winners and holding losers,” or other leek-like behaviors, the framework provides seven cognitive bias models (disposition effect, loss aversion, herding effect, anchoring effect, overconfidence, confirmation bias, and emotional pendulum) along with a complete self-checklist. It helps you identify the root causes and create an improvement plan.

2. Market Sentiment Analysis

When you need to judge whether the market is in extreme sentiment, the framework integrates sentiment indicators such as the Fear & Greed Index, the VIX (fear index), and financing balances. Combined with analysis of “leek statements” characteristics, it helps identify top signals (extreme greed) and bottom signals (extreme fear), providing reference for contrarian actions.

3. Evaluation of Individual Stock Decision Behavior

When you face a specific investment decision, the framework analyzes from a behavioral finance perspective whether the target has “pump-and-dump” (pig-slaughter) characteristics, whether it is trapped in concept hype, and whether the capital flow is healthy. It helps you use rationality to resist emotions and avoid becoming the bag-holder “leek.”

Core Functions

1. Seven Cognitive Bias Identification Models

Based on Nobel Prize-winning prospect theory (Kahneman & Tversky) and classic behavioral finance research, seven core cognitive bias models are distilled: disposition effect (selling winners and holding losers), loss aversion (unable to tolerate unrealized losses), herding effect (buying after rallies and selling in panic), anchoring effect (fixation on cost basis), overconfidence (the frequent-trading trap), confirmation bias (information cocoon), and the emotional pendulum principle (the core of reverse investing). Each model includes four sections: theoretical evidence, real-world application, limitations, and a contrarian strategy.

2. Decision Heuristics Toolkit

Provides six actionable decision heuristics:

Emotional extreme recognition (Fear & Greed < 20 — consider buying in extreme fear; > 80 — be alert to risk in extreme greed)

De-anchoring from cost basis (ignore buy cost when reassessing)

Reverse checklist validation (be more cautious with popular targets)

Stop-loss discipline (force stop-loss at a 10% loss)

Position sizing control (no more than 20% in a single stock)

Trading frequency control (fewer than 20 trades per year)

3. Leek Statements and Behavioral Identification System

Summarizes the “DNA” of how leek thinking is expressed:

Sentence pattern traits (short sentences, emotionally charged tone, frequent exclamation marks)

High-frequency vocabulary (all-in, cut losses, pick the bottom, being trapped, the main force, the “Zhuangjia”/insiders)

Four-stage speech patterns (chasing high prices → getting trapped → cutting losses → fearing missing out)

Essential elements for identifying pump-and-dump schemes (stock-tip teachers, WeChat groups, specific apps, promises of high returns, inside information)

This helps you quickly spot traps of leek thinking.

Common Questions

What is leek thinking? How do I know if I’m one?

Leek thinking refers to a psychological state in which investors are driven by emotion and fall into irrational behavioral patterns such as chasing after price surges and selling after declines, selling winners and holding losers, and frequently trading. You can judge it using the self-checklist provided by the framework: whether you tend to make emotional decisions, whether you exhibit the disposition effect (selling winners and holding losers), whether your trading frequency is too high (more than 20 trades per year), whether you lack stop-loss discipline, and whether you only look at positives while filtering out negatives. The framework offers daily and monthly self-audit tools to help you honestly face your trading behavior.

How do you operate a contrarian investment strategy? When do you buy or sell?

The core of contrarian investing is: “Be afraid when others are greedy; be greedy when others are afraid,” but it is not about blindly opposing the crowd. Before acting, you must verify: whether market sentiment is extreme (Fear & Greed < 20 for extreme fear, > 80 for extreme greed), whether the target’s fundamentals are reasonable, and whether your margin of safety is sufficient.

Buying strategy in fear: confirm extreme panic + fundamental screening + build positions in batches.

Selling strategy in greed: identify excessive optimism + valuation bubbleization + reduce positions in batches.

Important reminder: contrarian strategies do not guarantee success. You need to combine fundamental analysis, because markets can stay irrational for a long time.

What is the disposition effect in investing? How do you avoid selling winners and holding losers?

The disposition effect (Disposition Effect) is a classic behavioral finance phenomenon discovered by Shefrin & Statman (1985): investors tend to sell profitable stocks too early (run when up 5%) and hold losing stocks too long (refuse to sell at a 20% loss). It stems from two psychological mechanisms:
1) Avoiding the pain of admitting losses (loss aversion)
2) Using “realizing profits” to prove that you were right (a sense of pride)
Contrarian strategies include: forgetting cost basis and focusing on future value, setting dynamic take-profit rules (e.g., take profit with a 10% drawdown), and strictly executing stop-loss discipline (e.g., force stop-loss at -10%). Note: in value investing, holding high-quality stocks that are temporarily at a loss can be correct—you must distinguish between “stubbornly holding garbage stocks” and “holding quality stocks.”