This was taken from a post I made at Forex Factory today:
Here is a good real life example situation to 'provoke the trader within you.' Say you have a painting in your possession that's been in your family for a couple generations. You really don't even think it's that beautiful, but it's up on the wall for family history's sake. If the house burned down and you lost it, you'd be bummed, but it wouldn't be the end of the world.
Say then that times get tough, you loose your job and you’re having a heck of a time finding another one.
One day a red Ferrari pulls up and a gentleman comes to your door. He says he was in the neighborhood and happened to notice that beautiful painting you have hanging in your living room. He tells you he’s not an art buff or anything, but he just really likes that painting. He says I know it’s crazy of me, but I’d prefer not to leave here without that painting, I’ll give you a thousand dollars for it.
Now, what do you do and why?
2 comments:
employ subtle negotiating tactics to uncover the maximum price he's willing & able to pay. better yet, offer the painting for his ferrari as that's likely the most valuable biddable item on his person and his motivation seems to be limited to local and immediate circumstances.
btw: cool posts (vids & puzzle)
Very good Antoine, however, if he is will to part with the Ferrari, you'd better hold onto the painting.
The simple idea is to get him to a price where he is no longer interested, then start your negotiations from there. Chances are he is fully informed about the value of your painting, and you can simply manipulate him to the point of revealing the value of it.
In such an example though, you're a motivated seller, and by probing around his valuation estimate, you can get a reasonable price while giving him some price concession so he can still make a profit on his end.
In art and in trading, you need to know who is sniffing around at all times because you do not want to offer liquidity at your own peril.
To know this sort of thing takes time and money, but you can in many cases know who is trading and why. If you can't anwer those questions, DON'T TRADE! This is one of the main reasons that former pit traders have had so much difficulty when switching to electronic trading; they can no longer see the order-flow and the real story unfolding around them. There is hope though still, you just have to do some homework to find it.
Thanks for your comments!
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