As a trader or investor, you know that keeping a cool head whether the markets are on fire or flaming out is key to your success.

Yet, when havoc is wreaked on your portfolio, it's altogether too easy to forget not only that you've probably endured worse, but also how you might have failed or even managed to prevail in similar conditions.

Whether you're experiencing market deja vu or you're encountering an unfamiliar situation for the first time (or, the first time you're going to triumph in a particular market condition), it's important to strike the right balance between consistency and flexibility.

Examine, Re-examine Your Stance on Your Stocks

Unlike in politics and religion, dogmatic opinions about the stock market rarely result in success.

As investors, we cannot afford the luxury of a fixed point of view. In the same vein, we must avoid extremist viewpoints, whether too bullish or bearish.

The greatest investors are usually great realists. They have the ability to strip away emotion, dogma and their own personal prejudice when evaluating global events and their impact on financial markets

Perfect timing is a myth. Having a strong handle on the overall trend is a far-more-important skill. If the longer-term trend is intact, then short-term losses are just that: short term.

That's why I don't panic if a stock doesn't go my way right away -- so long as the company's management and business are still sound (if I'm bullish) or crumbling to pieces (if I'm bearish).

With stocks that I am long, I know that if I'm right on the larger macro view, and the company is a key player in the space -- barring corporate malfeasance or natural disaster -- THE STOCK MUST TRADE HIGHER .. regardless of, and maybe even in spite of, the rest of the market.

(At) Home on the Range

The market despises extremes; it's most comfortable when it's "middling."

Sixty-eight percent of the time, the market trades within one standard deviation of the mean on the bell curve. Knowing this gives us fantastic perspective when we see the market overly stretched in one direction or the other.

Like water always seeking the lowest point, the market is always seeking the "mean" and it will always revert back to the middle of its trading range.

Remember, too, that today's dog group is tomorrow's star group -- ALWAYS! That is why a strong understanding of sector rotation is so important.

Just like women's fashions, stocks rotate in and out of favor. It can be somewhat comical how predictable these rotations can be. Whatever we're seeing now, will be coming around again ...