Respect the Streak

Let's talk about streaks. Traders, like athletes can get hot, and when you're in your streak you want to bet bigger than when you're not. In hoops, you'll often find one player on your team who'll have a hot hand. So you keep going back to him while the hand's still hot. I once scored 21 points in the fourth quarter of a high-school basketball game when I got on a hot streak.

One of my hedge fund mentors always tells me, "Respect the streak." Most traders get in runs at times when they can put on some huge gains in a short amount of time and it seems like every trading idea they get works out almost immediately. You'll never be able to know for sure what starts such streaks or how to keep them going forever, or else you'd be a billionaire already. Heck, the very concept of streak and its inability to be quantified or proven is certainly up for debate. But I listen to my mentor, and I agree that you gotta respect and play big when you're in a hot streak like that.

I feel like I got cold when earnings season started. Seagate's (STX - commentary - Cramer's Take) been ugly and painful and even embarrassing. I feel like an idiot for ever thinking that Micron (MU - commentary - Cramer's Take) mattered or could rally. Even when I was right -- my paired trade idea of long Google (GOOG - commentary - Cramer's Take) and short Yahoo! (YHOO - commentary - Cramer's Take) last week, for example -- I was only half right, because I didn't put the Yahoo! short on the sheets before it collapsed. I try to make myself feel a little bit better about all of this because I did, after all, add to my Google calls when the stock was a good bit lower recently. And I did get short Novellus (NVLS - commentary - Cramer's Take) before it tanked.

But I'm not feeling streaky. I'd been much hotter earlier this year, catching some big gains early on and then going mostly to cash again when the Chinese market crashed 9%, setting off that contagion in March. But I am wondering if I need to recognize that such a streak seems to have ended.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.