Skyworks Solutions (SWKS) cancels an appearance and folks get excited. Price spikes $2 (2.5%) in 15 minutes and I'm left shaking my head. Speculations and rumors swirled and then quickly died as the stock is now $3 off that high and red for the day. I want to bang my head against the wall and scream, "Didn't we just discuss this with Twitter (TWTR) ?!" So, why do people keep chasing tweets or headlines like this?
We could have 20 or 30 or 50 conference cancellations and it will only take one instance where the company releases good news for traders to consider chasing everyone. Let's assume SWKS pulled out of the conference to issue a press release later today or later this week that they are being purchased for $100 per share, then we'll be inundated with "I told you so" and "it was so obvious." Next time we see a company withdraw from a conference, we'll remember missing the big one with SWKS. And the time after that, even if nothing happened with Company #2, we'll only remember SWKS. And the time after that. And the time after that. Even if nothing continues to happen with each subsequent name, we will remember Skyworks.
It's the same reason we fall into the most common mistake as traders. Selling winners too quickly and holding losers too long. Selling losers hurts, but what often hurts more is selling a loser and then watching it turn higher to become a winner without you. This happens less than our memory perceives. We remember the one that could have been rather than the 10 that would have hurt us more.
I suppose one could argue that watching a winner turn into a loser might hurt more than watching a loser become a winner without you. Again, these are the instances that influence our decisions and drive our emotional decision making.
We are driven by what could have been despite the odds. We are driven by variable reinforcement. While you can't eliminate it from your trading, simply being aware and catching yourself falling into the trap will save you many mistakes over the years.