There are a bunch of stocks that I obviously don’t get. Over time, approximately 68% of the 53,000+ signals at HEDGEfolios have been correct. However, there are a few stocks that I am chronically challenged by and when you take a look at the performance of past signals on any PROFILE page, you might run into one. For example, click on this link for Alcoa (AA). Inclusive of the current signal, I have been wrong on AA 13 out of 27 times since HEDGEfolios began (significantly below the 68%). That is not good and it is below what I expect of myself. But it is what it is and unfortunately, it is not the only one.

So why the confession? Portfolio management gurus will tell you the importance of identify and dealing with your trading weaknesses but don’t say much about how to actually do that. While I agree with that and as a general concept of going through life outside of trading, it is important to know your strengths and weaknesses. Nonetheless, I just don’t think it’s as easy as it sounds to identify a weakness and by definition, to learn how to overcome it. So I thought I’d share one of the ways I deal with this issue in the hope you might get something out of it.

If you’ve traded the same stock over the years, be objective and determine how many times you have been right. If it’s below your expectations, analyze what happened. Let’s say that you win 50% of the time, but your winners are significantly bigger than your losers. That wouldn’t concern me. However, if the situation is reversed or if your losers and winners cancel each other out, you should think about avoiding making trades in this stock.

For some reason, with the thousands of stocks that are available, too many investors get hung up on a small set that they trade over and over. If one of these stocks gets the better of your fundamental or technical analysis, make sure you recognize that if you decide to trade it again.

In my case at HEDGEfolios, I have committed to covering thousands of stocks and I don’t have the luxury of avoiding the ones that keep kicking my ass. So, I have a list of difficult stocks and when I am about to make a new signal in them, I try to evaluate whether I am making the same mistake.

In life, avoidance is not a way I advocate dealing with problems. However, in trading, as much as you’d like to believe you can identify a weakness and then modify your analytics to improve performance….I’d prefer avoidance. Learning from mistakes is great, but avoiding situations that encourage you to make the same mistake is greater. In trading, you will run into difficult stocks and it is not necessary to keep forcing the challenge.