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Measuring Performance by Looking at All-Time Highs

My goal is to keep my accounts as close to highs as possible regardless of what the indices are doing.
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Many market players don't like to admit that it happens but today is one of those days when I'm lagging the indices. My accounts are up but I'm not able to keep pace with the momentum in the indices. Many of the individual stocks that I've been trading are taking a rest or pulling back. Last week I experienced several days where the opposite occurred. My individual stocks were performing much better than the indices.

It is interesting how easy it is to let our performance relative to the indices impact our emotions. Rather than celebrating this action today I'm fighting my inclination to be less positive. There isn't anything overtly wrong with the market action other than the fact that I don't happen to be in the stocks that are performing the best.

I try to battle the emotions associated with performance relative to the indices by focusing instead on where my accounts are relative to their all-time highs. My goal is to keep my accounts as close to highs as possible regardless of what the indices are doing. If I'm at all-time highs then I'm not going to be as worried about a day or two of underperformance.

I have found that making up losses is by far the most unproductive thing you can do. If you give back 25% of your gains you need a gain of over 32% just to return to the high watermark. If you a experience a 50% loss then you will need a double just to be even. The more you give back the harder it is to recoup the losses.

On a day like today, when I am struggling with my relative performance, I want to stay focused on keeping accounts near their highs. I don't want to take on additional risk out of frustration with my underperformance. Instead I want to protect the gains I have and make sure I am positioned to push my accounts to new highs in the near future regardless of what the market might do.

Most money managers use benchmarks to measure their performance. I'd rather focus on all-time highs instead.

At the time of publication, James DePorre had no position in the securities mentioned.