{"id":11713,"date":"2018-10-18T07:30:47","date_gmt":"2018-10-18T11:30:47","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=11713"},"modified":"2018-10-18T07:30:47","modified_gmt":"2018-10-18T11:30:47","slug":"imagine-the-stock-market-is-a-game-show-2","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/imagine-the-stock-market-is-a-game-show-2\/","title":{"rendered":"Imagine the Stock Market Is a Game Show"},"content":{"rendered":"

Editor’s note:<\/strong> With Jeff busy presenting at the Legacy Investment Summit in Bermuda this week, we’re featuring a classic essay in today’s Market Minute<\/em>.<\/p>\n

We hope you enjoy Jeff’s commentary on what Let’s Make a Deal<\/em> and the stock market have in common… and how it’ll make you a better trader…<\/p>\n

\n

Imagine you’re a contestant on the game show Let’s Make a Deal<\/em>.<\/p>\n

Monty Hall pulls you out of the audience. He waves $2,000 in your face and says, “This is your money. You can take it and keep it right now, or you can trade it for what’s behind the curtain.”<\/p>\n

Of course, you know from a lifetime of watching daytime television that there’s a 50% chance that what’s behind the curtain is an all-expenses-paid trip to Mazatlán – valued at $5,000 – and a 50% chance that it’s something virtually worthless, like a farm animal.<\/p>\n

What do you do?<\/p>\n

If it’s me… I’m taking the cash.<\/p>\n

I’m thinking, “I came here with nothing. There’s a 100% chance I’ll leave here better off if I take the money. There’s only a 50% chance I’ll leave here happy if I take what’s behind the curtain. Either way… my life isn’t going to change dramatically. So I’ll take the $2,000 and be happy no matter what.”<\/p>\n

Here’s another line of thought…<\/p>\n

“I came here with nothing. The worst case is I’ll leave here with nothing. But there’s a 50% chance to increase the return on my prize by 150%. The odds justify that trade. So I’ll pick what’s behind the curtain.”<\/p>\n

Here’s the thing… there’s nothing wrong with either decision. All that matters is how you view the consequences of the trade. Let me explain…<\/p>\n

I’m going to be happy if I get a $2,000 windfall profit. I might be slightly more ecstatic if I win a trip valued at $5,000. But I’ll feel like an idiot if I give up the $2,000 and go home with a goat.<\/p>\n

So I’ll pass on “ecstatic.” I’ll take “happy.”<\/p>\n

Not everyone thinks that way – which is why we love watching game shows.<\/p>\n

Let’s apply this thought process to the stock market…<\/p>\n

Every time I close a trade, in the back of my mind, a little voice asks, “What happens if it moves even higher?”<\/p>\n

This is the equivalent of Monty Hall asking if I want to keep the $2,000 or trade it for what’s behind the curtain.<\/p>\n

I know for sure that I’m happy if I close the trade right now. I don’t know if I’ll be happier or feel like an idiot later.<\/p>\n

So I almost always chose to err on the side of happiness.<\/p>\n

Now… if this is your only time on a game show… if it’s your only chance to make a trade in front of Monty Hall, it’s understandable if you choose what’s behind the curtain.<\/p>\n

After all, it’s your only shot to maximize your gains.<\/p>\n

I get it.<\/p>\n

But the stock market isn’t a game show. We have trading opportunities almost every single day. The secret to longevity as a trader is to consistently take the money when it’s flashed in front of you.<\/p>\n

You might feel a tinge of disappointment if a trip to Mazatlán is behind the curtain. But you’re still heading home with more money than you had before.<\/p>\n

Be happy. At least you’re not going home with a goat.<\/p>\n

Best regards and good trading,<\/p>\n

<\/p>\n

Jeff Clark<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

Have you ever “got the goat” when a trade went sour?<\/p>\n

Let us know – along with any other trading stories or questions – right here<\/a>…<\/p>\n","protected":false},"excerpt":{"rendered":"

The market’s got a deal for you…<\/p>\n","protected":false},"author":34,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-11713","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/11713","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=11713"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/11713\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=11713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=11713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=11713"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=11713"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=11713"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=11713"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=11713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}