I recently attended a minor league baseball game while on vacation in Oregon where the Eugene Ems were playing the Yakima Bears.  Between innings, the Public Relations people for the Ems pulled people from the stands to play fun games sponsored by local area merchants.

One of the games was “What’s In The Box” and was sponsored by a local hair styling and beauty salon.  The lucky young woman that was chosen to participate was given a 6 month gift certificate for products and services at the salon; a very nice gift.  However, she was given the chance to exchange her prize for an unknown gift in the box.  The crowd was chanting and urging her to choose the box.  She had a very generous prize.  She was already a winner.  She could walk away ahead.  The young baseball fan chose the box.  She chose the box because it’s human nature.  What contributed to her choosing an unknown outcome for a known and generous outcome?  There were several reasons: 1) Peer pressure to do so 2) “Take a chance” mentality 3) Personal greed 4) curiosity and the excitement that I call the “Christmas Morning Syndrome” that you may recall experiencing as a child when you couldn’t wait to open your gifts.  I can guarantee you that the promotional people know human nature.  The first gift would have been the better choice because she got a lesser prize by choosing the box.  The hair salon got their marketing exposure for less.

So, what does this have to do with trading!?  Everything!  At times, we opt for an unknown and riskier outcome instead of a known outcome.  We stay in trades too long, turning unrealized gains into a realized losses.  We sometimes approach the market with a gamblers mentality instead of treating our market activity as a business.

The lesson here is to know that when you feel that you want to choose the box, remember my baseball story and choose the 6 month gift certificate instead.  You will be further ahead.  Best, Robin

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