NEW YORK (TheStreet) -- Eating a bowl of humble pie is not my favorite assignment. Remembering the lessons learned from both my profitable trades and my losing ones is an instructive exercise that's worth the time.When TheStreet's Jim Cramer wrote to Real Money subscribers about an important goal of virtually all traders and investors, he didn't mince words: "Remember, the real goal for all people in this market is to make this business less of a guessing game about what the Fed will do and more of an investment business where we judge stocks by what companies say." That was foremost in my mind when I went long shares of Lockheed Martin ( LMT) at the end of February when shares fell below $86 each. The financial markets were riled by the possibility that the so-called budgetary "sequester" that the federal government was embroiled in would hurt defense companies. I noticed that at $86-a-share Lockheed was trading for around 9 times both current and forward (1-year) earnings. Lockheed's leadership held to its guidance for the company's sales for the year. What really caught my eye was its dividend. With an annual payout of $4.60 and the share price at $86 the yield-to-price was a very rewarding 5.35%. I rubbed my eyes with disbelief, checked the numbers again and went long. In less than 3 months I was sitting on close to a 22% gain as Lockheed shares moved above $105. Knowing that bulls make money and bears makes money but pigs get slaughtered I decided to sell. The annualized rate of return for this trade was nearly 88% and that pleased me greatly. This one-year chart illustrates how Lockheed shares behaved. LMT data by YCharts
The first huge take-away lesson was if you don't own a real, functioning crystal ball don't try to predict the future prices of any investment class or sector. I bet big with precious metals over the past two years and I lost big as the price-per-ounce of silver and gold went the opposite way. If I had subscribed to a trailing stop alerts service like TradeStops and diligently acted upon this objective way to keep unacceptable losses from happening I would be many thousands of dollars ahead. With stocks or options always remember to hedge your bets and firmly decide not to lose more than you can afford. Use position sizing disciplines to keep from being too exposed to one stock or sector. One final thought: It's prudent to decide ahead of time how wrong we must be before we sell our losers. A 20% loss is easier to recover from than a 90% loss. Trailing stops can help with that process, plus it empowers an investor with a discipline that lets the winners keep moving higher. At the time of publication the author was long shares of Newmont but neither long nor short shares of any other stock mentioned in this article. Follow @m8a2r1 This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.