Praise for the Book

“The stock market is a projection of the real complex world. Behind valuations lie emotions and capital flows. So navigating the market is like sailing a vast ocean – we need to acknowledge our own weakness, understand the world, the market, and ourselves rationally. We need to admit our weak points, cultivate our strengths, operate in familiar industries with our own methods, and strive for safety and performance. Even then, we must stay open, spot and correct errors, and do what we can. Practice shows we can only fight the market at rare times within our core circle of competence. For the rest, follow the trend and admit your weakness. For detailed guidance, read this book.”
— Chen Haitao, Founder of “Investment Research Club”

“Every investor has strengths and weaknesses. Some play to their strengths, letting them shine. But those who master the ‘weakness system’ learn to ‘make good use of weakness’ to handle market complexity and uncertainty. Wang Liangliang’s book is conceptually original and practically oriented – worth reading repeatedly.”
— Zhu Jiu, Guest on CCTV’s Investor Talk, author of Understanding Baijiu Stocks

“The best way to make money in the stock market is to find out why you lose money. Wang Liangliang uses the word ‘weakness’ to explain what investors unknowingly overlook when facing complex systems and cognitive biases – even mistaking it for strength. This book provides a targeted approach from the perspective of ‘good weakness.’ Constructing investment principles and strategies from this angle is both profound and innovative.”
— Wang Zhijia, Dean of Zhongba Academy

“The ‘weakness system’ reminds me of ‘the desperate army wins.’ In stock market decision‑making, if we adopt a weak‑player mindset – cautious verification, conservative valuation – we can still achieve satisfactory returns. Persist, and we naturally become strong. This book systematically explores the weakness system and helps sharpen investors’ thinking.”
— Weijinhua, veteran value investor, author of Road to Financial Freedom

“My own investment system is entirely built on the weakness system – I have a special affinity for it. It originates from Buffett’s circle of competence: don’t do what exceeds your ability. But Buffett only drew the dragon without adding the eyes. Feng Liu first coined the ‘weakness system,’ more fully expressing the characteristics of the weak and how to invest. This book builds on Feng Liu’s work, proposing the concept of ‘good weakness,’ emphasizing the pursuit of certainty and playing to strengths while avoiding weaknesses.”
— Er Ma You Zhi, Top 10 influencer on Xueqiu, author of Noise and Insight

★ Most investment systems teach you how to be strong. This one teaches you how to make good use of “weakness”.
★ This is not a beginner’s guide. It is a resonant work for seasoned investors who have lived through market ups and downs.
★ Here is a quantifiable, actionable investment system based on bounded rationality, integrating behavioral finance and probabilistic thinking – offering a sustainable path to consistent returns for any “weak” investor in volatile markets.

1. Challenges the efficient market hypothesis, proposing the formula: Price = Value + Weakness.
2. Systematically analyzes cognitive and decision biases, providing “decision hygiene” and “nudge” strategies.
3. Integrates Bayesian thinking and the Kelly formula, introducing a “signal significance” indicator to replace market predictions with scientific probability, optimizing stock selection and position sizing.
4. Uses a “Six‑Stage Cycle Model” and a “Good‑Weakness Thermometer” to turn vague cycle judgments into quantifiable turning‑point tools.
5. Introduces the concept of “contrarian factors,” freeing contrarian investing from blind “anti‑consensus for its own sake.”
6. Identifies eight self‑control traps and provides a stress‑management and checklist‑based decision framework.

In the investment world, faced with market complexity and uncertainty, “weakness” seems inherent to human beings. This “weakness” refers to our innate “bounded rationality” – limited attention, memory flaws, intuitive interference, behavioral biases, group noise, probability fallacies, and a lack of scientific understanding of cycle patterns, falsification, dialectical thinking, contrarian thinking, etc.
Everyone entering the market longs to be strong. No one wants to be weak – or at least admit it. So what is the point of the “weakness system”? That is the first question we must answer.
As the saying goes, “It’s the good swimmers who drown.” Likewise in investing: novices may suffer small frequent losses, but it is the self‑proclaimed veterans who lose big. Why? Not because they lack experience or just have bad luck, but because they rely on their resources and experience, often overlooking their own weaknesses – i.e., “not recognizing weakness.” What truly affects long‑term investment results is not one’s strengths but one’s weaknesses – as the bucket principle reveals.
This book starts from “weakness” in investing, identifying and summarizing various forms of weakness, and explores methodologies to correct and cope with them. From the perspective of “good weakness,” it helps readers understand bounded rationality, grasp intrinsic value, master market cycles, seek excess returns, deconstruct security valuation, and control portfolio risk – ultimately building a sustainable investment system for continuous success.

Wang Liangliang

Fund manager, financial media professional, founder of “Weakness System Study Club”.
Began investing in 2009, specializing in contrarian investing. Gained widespread attention for successful investments in turnaround stocks such as Li Ning and Great Wall Motor, achieving ten‑bagger returns, while sharing real‑time value analysis and accurate predictions of market bull/bear cycles on Xueqiu under the pen name “Jinfeng No.1.”
Investment motto: “What humans can grasp is the tide’s cycle, not the size of each wave.”
Inspired by renowned investor Feng Liu and combined with his own 15+ years of experience, he advocates and practices the “weakness system” as an investment strategy. As an active practitioner and deepener of this system in the Chinese stock market, he has, to a certain extent, developed and refined it.

Preface

Chapter 1: Bounded Rationality and the Weakness System
1.1 Efficient Market Hypothesis and Excess Returns
1.2 Pricing Theory of the Weakness System
1.3 Deep Interpretation of “Weakness”
1.4 Comprehensive Overview of the Weakness System

Chapter 2: Cognitive Limitations in Investing
2.1 Limited Attention and Selective Perception
2.2 Cognitive Biases and Improvement Methods
2.3 Principles and Characteristics of Memory
2.4 Memory and Availability Heuristics
2.5 Exploring Intuition in Investing
2.6 How to Use Intuition Correctly

Chapter 3: Behavioral Biases and Noise
3.1 General Strategies for Dealing with Biases
3.2 Three Basic Behavioral Biases
3.3 Five Derivative Behavioral Effects
3.4 Differences Between Biases and Noise
3.5 Types of Noise in Investing
3.6 Strategies to Cope with Noise

Chapter 4: Probabilistic Thinking in Investing
4.1 Randomness in Investing
4.2 Three Meanings of Probabilistic Thinking
4.3 Pitfalls of Causal Thinking
4.4 Correlational Thinking and Spurious Correlation
4.5 Probability Fallacies and Representativeness Heuristics
4.6 Refinement and Application of Bayesian Thinking
4.7 Win Rate and Odds in Kelly Thinking

Chapter 5: Decision Science in Investing
5.1 The Relationship Between Investment Decisions and Luck
5.2 Framing Effects and Risk Attitudes
5.3 Probability and Certainty Preferences
5.4 Beware the False Certainty Bias
5.5 The Maximum Expectation Principle in Investing

Chapter 6: The Weakness System and Technical Analysis
6.1 Dialectical Unity of Value and Technical Analysis
6.2 Basic Tools of Technical Analysis
6.3 Supply/Demand and Price‑Volume Analysis
6.4 Classification and Application of Technical Indicators

Chapter 7: Identifying Cycle Positions and Turning Points
7.1 Three Laws of Cycles
7.2 Emotional Pendulum and Risk‑Attitude Pendulum
7.3 Importance of Identifying Cycles
7.4 Six‑Stage Stock Market Cycle Model
7.5 Application of the Six‑Stage Cycle Model
7.6 Thermometer and Cycle Turning Point Identification
7.7 Other Methods for Turning Point Identification

Chapter 8: The Hunting Ground for Excess Returns
8.1 The Smart Hunter
8.2 Hunting Ground 1: Value Effect
8.3 Valuation: Science and Art
8.4 Hunting Ground 2: Momentum Effect
8.5 Calculating and Capturing Momentum
8.6 The Puzzle of Persistent Excess Returns
8.7 Making Good Use of Value and Momentum Effects

Chapter 9: Contrarian Thinking and Contrarian Investing
9.1 The Gap from Concept to Practice
9.2 Components of Contrarian Thinking
9.3 Contrarian Thinking and Dialectical Thinking
9.4 Contrarian Thinking and Falsification Thinking
9.5 Advantages and Necessity of Contrarian Investing
9.6 Overview of Contrarian Investment Strategies

Chapter 10: Checklist Thinking and Good‑Weakness Investing
10.1 From Checklist Revolution to Checklist Thinking
10.2 Classification Thinking in Investing
10.3 Application of Investment Decision Trees
10.4 Examples of Checklist Monitoring and Inspection

Chapter 11: Prescriptions for Self‑Control in Investing
11.1 Sources and Characteristics of Self‑Control
11.2 Methods to Improve Self‑Control
11.3 Traps Affecting Self‑Control
11.4 Using Self‑Control Prescriptions Effectively

Preface

The concept of the “Weakness System” was first proposed by the well‑known investor Feng Liu, and has since gained recognition and resonance among many seasoned professionals in the investment community. Thanks to Feng Liu’s outstanding achievements in both personal investing and fund management, this idea has shone brightly in China’s investment landscape. Most people interpret the “weakness” in this system as an investor’s mediocre talent or lack of resources – assuming that they are at a disadvantage in areas such as information access, depth of understanding, time and energy, emotional control, and personal networks. However, from Feng Liu’s public interviews and writings, we can see that his investment philosophy and strategies go beyond merely emphasising the shortcomings of individual investors relative to institutional investors in terms of resources and professionalism, nor are they simply about some investors lacking talent or experience.

In the world of investing, faced with the complexity and uncertainty of the market, “weakness” seems to be an inherent human attribute. What we mean by “weakness” is our innate “bounded rationality” – encompassing limited attention, memory flaws, intuitive interference, behavioural biases, group noise, probability fallacies, as well as a lack of understanding and scientific application of cyclical patterns, falsification, dialectical thinking, contrarian thinking, and so on.

Everyone who enters the market longs to be strong. No one wants to be weak – or at least to admit that they are weak. So what is the point of the “Weakness System”? This is the first question we must answer when studying it.

As the saying goes, “It’s the good swimmers who drown.” The same is true in investing: novices may suffer frequent small losses, but those who lose heavily are often the self‑proclaimed veterans. Why? Not because they lack experience, nor can it be simply blamed on bad luck. Rather, it is because they rely on their own resources and experience, and often overlook their own weaknesses – that is, they “do not recognise their weaknesses.” What truly affects a person’s long‑term investment results is not their strengths, but their “weak” points – just as the bucket principle reveals.

Not knowing our own “weak” points in investing is like groping forward in a dark, rugged tunnel without a torch. Even if we are heading in the right direction, the bumps along the way will leave us bruised, sometimes slow us down, or even bring us to a halt. A torch may not give us a perfect view, but its flickering reminders will give us an edge over others.

From a dialectical perspective, if we want to become strong in the investment market, we should start from the opposite of strength – weakness. By deeply identifying and successfully coping with various “weak” points – both our own and those of others – we will eventually become truly “strong” investors capable of sustained profitability over the long term. In the complex system of the investment market, the path to becoming “strong” does not come from blindly pursuing strength, but emerges naturally from the practice of identifying and overcoming weaknesses.

At present, the vast majority of value‑investment theories originate overseas. The “Weakness System,” deeply rooted in Chinese culture and the financial market environment, offers a refreshing perspective. However, although the concept of the “Weakness System” has spread widely in China’s investment circles, regrettably there has been relatively little in‑depth discussion or systematic research on it. As an investment system, scattered ideas without a complete conceptual framework and actionable methodology are insufficient. This book aims to thoroughly explain the ideas and methods of the “Weakness System,” thereby filling a relative gap in this field.

The original intention of writing this book is to promote the ideas and methods of the “Weakness System” to the international investment market, and to engage in deep exchanges with investors who are committed to studying and practising it. Through this, we hope that investors can deepen their understanding and application of the “Weakness System,” helping them achieve even better results on their investment journeys.

Unlike traditional investment books, this book adopts a completely new perspective. It starts from “weakness” in investing, guiding readers to identify and refine the various forms of “weakness,” and explores methodologies to correct and cope with them. Then, from the perspective of “making good use of weakness” (good weakness), it helps readers understand bounded rationality, grasp intrinsic value, master market cycles, seek excess returns, deconstruct security valuation, and control portfolio risk – ultimately building a sustainable investment system for continuous success.

This book consists of eleven chapters.

Chapter One provides a comprehensive explanation of the “Weakness System.” It is a strategic investment system that pursues excess market returns, standing in contrast to the efficient market hypothesis. Before discussing the Weakness System, we need to carefully analyse the applicability of the efficient market hypothesis. This chapter reveals investors’ “bounded rationality” and proposes the pricing principle and formula of the Weakness System: Price = Value + Weakness. It also explains the meaning of “weakness” from four dimensions and introduces the concept of “good weakness.”

Chapter Two analyses the causes of investors’ cognitive limitations, including limited attention, memory flaws, and intuitive traps. As the fable of the boiling frog shows, each of us is affected by limited attention to varying degrees. Selective perception is a key factor leading to many cognitive biases among investors. Investment activities are closely related to memory, but memory is susceptible to “episodic reconstruction” and the “peak‑end rule,” making us prone to various cognitive biases and availability heuristics in our investment decisions. This chapter also explores the role of intuition in investing, analyses its strengths and weaknesses, and proposes strategies for using intuition appropriately.

Chapter Three delves into behavioural biases and noise in investing. It focuses on three basic behavioural biases and their five derivative behavioural effects, discussing their formation mechanisms and impact on investing. At the same time, it proposes two general strategies to deal with behavioural biases: “assistance” and “nudging.” In addition, this chapter explains the concepts of “noise” and “decision hygiene,” and discusses how to avoid the trap of group noise while effectively harnessing the wisdom of crowds.

Chapter Four explores randomness in investing and the “causal thinking” versus “correlational thinking” in decision‑making, listing five “probability fallacies” that affect investment judgments. It also explains the application of “Bayesian thinking” and “Kelly thinking” in the investment field, introducing the concept of “signal significance.”

Chapter Five focuses on the theme of decision science. It analyses the relationship between investment decisions and luck, and the nature of high‑quality decisions. The core of this chapter is to warn us to beware of the potential misleading effects of “framing effects,” “certainty preferences,” “possibility preferences,” and the “false certainty effect,” and to advocate following the “maximum expectation principle.”

Chapter Six emphasises the importance of technical analysis as a decision‑making aid in value investing. Given the long‑standing tendency in the investment world to pit value investing against technical analysis, this chapter starts from the market pricing principle, explores the dialectical unity of technical analysis and value analysis, and introduces the basic tools, classification methods, typical indicators, and the principles and application of “price‑volume analysis.”

Chapter Seven explores the mysteries of cycles. What humans can grasp is the tide’s cycle, not the size of each wave. The rise and fall of the stock market are like the ebb and flow of the tides. Those who perceive the laws of cycles will hold the key to wealth! This chapter analyses the three major laws of cycles, the six‑stage stock market cycle model, and how to use the “Good‑Weakness Thermometer” and other tools to determine cycle positions and identify turning points.

Chapter Eight focuses on the source of “excess returns.” Investing is like hunting – the chance of success is higher only in places where prey (potential returns) is abundant and natural enemies (risk factors) are scarce. This chapter explores the main sources of excess returns and strategies for using them, discusses the science and art of stock valuation, and clarifies that the key to valuation is not calculation but direction and process.

Chapter Nine examines the components of contrarian thinking. Contrarian thinking is not about deliberately going against market consensus just to be different, nor is it simply taking the opposite action to the crowd, nor is it the blind confidence of “I’m sober while everyone else is drunk.” So what exactly is contrarian thinking? This chapter offers investors novel and profound insights. Only those who truly master contrarian thinking can engage in genuine contrarian investing. Therefore, this chapter also details the strategies and methods of contrarian investing, introducing the new concept of “contrarian factors.”

Chapter Ten introduces “checklist thinking.” It highlights its value in improving attention, compensating for memory flaws, reducing intuitive interference, correcting behavioural biases, filtering group noise, and avoiding probability fallacies. This chapter also discusses the application of “classification thinking” in checklists, and the concept and methods of “investment decision trees.” It provides sample checklists for stock pools, Porter’s Five Forces, cycle position and progress, valuation and financial indicators, significant signals, technical analysis, and bounded rationality.

Chapter Eleven analyses the sources, characteristics, and methods of improving self‑control. Long‑term investing is a high‑pressure, intensive endeavour. To ensure success, investors must possess strong self‑control. In the investment field, true masters integrate investment concepts and methods into their daily lives and persist over the long term with the support of self‑control. In addition, this chapter discusses eight traps that affect self‑control and twelve strategies for effectively using self‑control.

In the investment domain, we are constrained by our own bounded rationality, facing ubiquitous challenges of “uncertainty” and “randomness.” We cannot precisely calculate the intrinsic value of securities, nor predict the exact outcome after a specific event. Our judgments are also swayed by group psychology and social influences. Against this backdrop, the Weakness System does not rely on the overwhelming information resources required by strong‑player thinking, nor does it depend on precise forecasts of company earnings or complex valuations of company worth, yet it can still aim to achieve stable, excess market returns. In the face of complex and volatile markets, only those investors who “make good use of weakness” can respond calmly. The Weakness System represents wisdom and strategy for dealing with bounded rationality within a complex system.

Please note that this book is not suitable as an introductory text for complete beginners. For readers without a foundation in investing or much market experience – unless they are exceptionally perceptive – parts of the book may be difficult to understand (but that does not prevent you from keeping it on your desk, revisiting it as your investment knowledge and experience accumulate, and gradually gaining insight). However, for investors with more than ten years of experience, who have lived through multiple bull and bear cycles, who are familiar with market fluctuations, cycle shifts, industry changes, company transformations, and asset ups and downs, the content of this book is likely to resonate strongly and inspire a desire for further study and exchange. For those investment masters who have already reached a profound level of understanding and practice, who deeply appreciate the principle that “great skill appears clumsy, and embracing weakness leads to enduring strength,” I believe the content of this book will also bring a knowing smile and deep agreement.

Given the diverse knowledge, experience, and backgrounds of readers, and to optimise the reading experience, this book has been condensed from nearly 300,000 words to just over 100,000 words. Although the core concepts and methodological framework of the Weakness System are fully explained, due to space constraints some details of certain investment concepts and principles could not be explored exhaustively. To help those who are unfamiliar with basic concepts or wish to study the Weakness System more deeply, the author plans, after the official publication of this book, to gradually release the condensed and supplementary content (material that was not included) according to the book’s chapter structure on the public WeChat account “Weakness System in Practice” and on Xueqiu under the handle “Jinfeng No. 1,” and to maintain real‑time interaction with readers.

Well, friends, let us now set off on our journey to study the “Weakness System”!