An older Iranian friend of mine passed along some sage advice not too long ago. His advice was to never take an ill-gotten penny. The bad penny will spread and ruin your finances, not right away, but with time.

In theory a penny is a penny, certainly they all spend the same. In the trading world though how many times have you heard, I went against my trading plan, but I ended up saving a good sum of money. I am certainly guilty of this habit, but I noticed something: when I second guess myself, in the long run I never seem to make as much as I could, if I stick to whatever plan I started with. Every once and a while I save a loss, but they usually were not real big to begin with. What I end up doing is shorting my gains mostly.

Like any good trader, I keep a trading log. My hit ratio for the year for my swing trades alone is 72% accuracy (not including the loss I will sustain today) with a 35% net gain over 18 trades, and in my second account, it has 86% accuracy over only 7 trades with 18.4% gain. I also had some nice hits in growth stocks like TIBX (almost 50% gain, while I was 50% in) and HS (around 28% gain, while I was 50% in) and some small hits in ULTA within the past year. SLV has been my only real albatross in the past year, but fortunately I was not in too deeply so those losses were minimized quite a bit.

Each style is different though so I try to look at them in a compartmentalized point of view. Let's take my best swing trading account alone. I not only keep tabs of my performance, but if I try to beat my own game and buy or sell earlier or later than the TA suggests, I keep tabs of the original plan. Anyways, for my swing method with 35% gain, I could have produced a full 45% in SPY (UPRO,SPXU) if I did not over-favor safety and veer off-course, trying to micromanage my trading plan so much. I could have made 56% using IWM (TNA/TZA) and 69% using XIV/VXX combo. The kick in the pants is that my accuracy would only be 65%, not in the 70's and 80's like my second guessing version produced. That means increased short term pain in exchange for more long term gain. I don't need bragging rights, I need money. 

Sometimes we look at what is happening NOW, and we forget that the market does not go from A -> B directly, it wanders around like Moses in the Desert, taking 40 years to cross a span that should be navigable in about a handful of years. Sometimes all the indicators point to one direction and price wanders off in the other. That's just the life of a trader, and you can't lose your pride over that or your ego. The penny you save by second-guessing will lead to the loss of many more. Trading is a marathon run, and must be consistent, and you must overcome set-backs with the coldest of hearts. 

You will sustain losses, and I am not advocating being stubborn and holding when the price and TA firmly tells you otherwise. When you do take your loss, never seek revenge against Mr. Market as you will only sustain worse losses, just keep going. Never develop fear of him either. Mr. Market feeds off of fear and revenge. Mr. Market will tempt you, but remember investing is not gambling, and you should not be guessing or hoping. THERE IS NO PLACE FOR HOPE, FEAR OR ANGER IN TRADING.

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