Imagine you’re a contestant on the game show “Let’s Make a Deal.”
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.”
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.
What do you do?
If it’s me… I’m taking the cash.
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.”
Here’s another line of thought…
“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.”
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…
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.
So, I’ll pass on “ecstatic.” I’ll take “happy.”
Not everyone thinks that way – which is why we love watching game shows.
Let’s apply this thought process to the stock market…
Every time I close a trade, in the back of my mind, a little voice asks, “What happens if it moves even higher?”
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.
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.
So, I almost always chose to err on the side of happiness.
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.
After all, it’s your only shot to maximize your gains.
I get it.
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.
In today’s environment, where stocks are screaming towards all-time highs while the economy is in a far more perilous state than it was just three months ago, it might be time to settle on “happy” over “ecstatic.”
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.
Be happy. At least you’re not going home with a goat.
Best regards and good trading,
P.S. Throughout my career, I’ve utilized strategies and chart patterns to give me the best predictions on how to navigate the market – especially during uncertain times like these.
That’s why I created the 3-Stock Retirement Blueprint. This report shows that instead of buying and holding – and praying the market doesn’t fall – you can trade just three stocks over and over again to fund a comfortable retirement.
In addition to the blueprint, with the Jeff Clark Trader membership you’ll receive eight training videos, the first three sessions of my Crash Course, and a quarterly Q&A (the next being on June 22)… for only $19.
In today’s mailbag, Joe gives his opinion on Jeff’s Memorial Day Market Minute feedback…
Hi Jeff, as a 23-year retired Air Force veteran, and the son of a 20-year Air Force veteran, I’ll take exception to what Lee said. Yes, the government limits our freedom to some extent, but if the military weren’t there to keep aggression at bay from the likes of China and Russia, does he really think that we would be able to keep 100% of our freedom?!
Just ask the folks who were living in Poland, Hungary, and the other nations that Hitler stormed into because they couldn’t defend themselves!
Folks like Lee seem to think that we live in isolation, or a vacuum, and no other country would come to take what we have if they knew that we couldn’t defend ourselves. Sad to say, but there are folks who ignore history and just don’t get the reality of evil in the world.
Thanks for your insight and wisdom. I’ve made my first two trades on your last two recommendations. I’m looking forward to future gains with your help! Thanks.
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].