Five Keys to Improving Your Performance

I'm not especially good at short-term trading. I find it hard, as any but the most gifted technical analysts do, to pick short-term bottoms and tops with anything resembling accuracy. But I thought I could force profits from this situation despite my own discomfort with short-term trading. Because of my own discomfort with this trading strategy, I fell back on stop-losses for these positions. It all added up to quick losses of 15% or so when I did, indeed, miss calling the bottom for the stocks.

I wound up getting stopped out of the positions before the stocks rallied. If I'd held onto Ultra Petroleum, Dril-Quip and Arris Group through the drop and to the end of the year, I'd be looking at profits of 21%, 33% and 23%, respectively. I'd give myself a grade of poor on this measure.

Did I strike an appropriate balance between the long and the short term? This is a tough one. I certainly bought and sold more rapidly this year than in years past. Some of that change was, in my opinion, an appropriate response to the choppy nature of the stock market in 2005. Trends didn't last very long, and rallies were rapid and tended to end abruptly. One danger of seeing that pattern and investing to match it is that, as time went on, I tended to get impatient.

I definitely sold some things this year -- Joy Global(JOYG Quote), for example -- way too early because I had become trigger happy. I saw a trend shift in the making and sold a stock that had a good way to run before the larger trend of a stronger dollar cut into company earnings. On the other hand, I consciously decided to hold most of my energy-sector stocks through the last quarter of the year, even though they weren't likely to burn up the track during that period. The hold decision, which I still believe in, was a tradeoff of (potential) short-term profits for (potential) long-term gains in 2006. I'd give myself a fair on this measure in 2005.

This kind of performance scorecard is less satisfying than hard numbers -- you can't brag about the results at New Year's parties.

But it does have one advantage: Last year's performance number doesn't carry over into 2006. The lessons of this subjective rating do. If I can learn from the past, I have a chance to be a better investor in 2006.

And maybe the market will reward that.