The position we all play for, the circumstance you want to be in, the ultimate catbird seat for a portfolio comes down to one simple equation: an open, winning trade in a strong security with little interest from the herd.

More than fast quotes, cheap commissions or top-quality research, I believe that combination is the most powerful, enviable and consistently profitable circumstance in portfolio management precisely the stuff on which big profits are made.

Let s break down exactly what that means.

To say a trade is open means, quite obviously, that it is still held within your portfolio and has not yet been sold (or in the case of a short sale, covered).

Open trades are quite literally how you make money. As we often point out, trading should really be called waiting, because so much of the real return comes not from feverishly buying and selling, but from participating in an idea or sector as it undergoes a significant market revaluation. Because there is a palpable euphoria that comes with taking a gain, no matter how small it might be, it requires a discipline that s much easier in theory than in practice.

Many investors see a profit as a lark, a temporary phenomena to be immediately grabbed. And when you approach investing like gambling, it s natural to see it in this fashion.

But in taking a gain, we are actually stopping it. Too often investors slit their own throats (figuratively speaking, of course) by systematically selling the winners and holding onto, or even worse, doubling up on, the losers.

A winning trade is also easy to discern, and when reviewing individuals portfolios, I often start with the most basic and elementary of analysis: What s held at a gain what s held at a loss?

In our hearts, we d like to believe the ugly duckling fairy tale that the biggest losers in our portfolios all make miraculous 50% comebacks. Despite the historic recovery for risky assets in 2009, we more frequently end up dragging around a closet full of underperformers that go nowhere for years on end.

Markets are not chaotic. They move in trends, which tend to persist over time and often for longer than any of us might expect. Except for Amazon.com (AMZN), most investors who bought tech stocks for the long haul during the late 1990s have yet to see those stocks come close to revisiting those peaks.

Winning trades are an objective, unequivocal indicator that the asset, regardless if it s McDonald's or the Mexican peso, is working in the current environment. That gain, even modest, far outweighs any economic data, research reports, earning announcements that might impact how I approach a particular security.

The winning trade is actually worth more than the profit itself. The fact of the matter is that even as you bought XYZ at $25 and watched it rise to $30, other investors are buying it for the first time at $30 that day because they think it s going to $45 or more. As the old trading maxim suggests, worry about the losers and the winners take care of themselves.

A strong trade is one that s performing well in today s market environment. And while we often shy away from buying solidly performing stocks on the basis that we missed the move, we re almost always better served by focusing on trades that are doing well as opposed to those which are not.

As previously mentioned, markets tend to move in trends which persist over time. So the fact XYZ is having a great week, or month, or quarter, is an unquestioning confirmation that, regardless if it s Japan or junk bonds, the market is now favoring this particular idea

We wrote about semiconductors last March as an example of a promising trend, one which then went on to persistently higher prices in subsequent months. What caught my eye wasn't the sector s margins, new product developments or management, but rather the leading nature of the securities themselves. Back then when the market rallied, it was often semiconductors that were leading the way.

No method of security selection is foolproof. But because the long run starts in the here and now, investors should focus on strong, contemporary trends now performing in the marketplace rather than weak ideas constantly breaking to new lows.

Finally, the kicker comes on those rare occasions when you ve got the open, winning, strong trade in a security in which the herd, the slow-moving investment crowd, has not yet fully embraced.

That a security or theme receives widespread media or message-board attention doesn t necessarily mean the move is over, but it does indicate it has matured. The fact is that bull markets are built on doubt, not hope. Once everybody has finally bought into an idea, there s literally no new money on the sidelines to push it any higher.

The herd s participation in a market can be difficult to quantify, exactly why I like to combine both qualitative measures, such as the frequency of Twitter and message-board postings, along with more quantitative measures such as volume and mutual fund flows.

Markets are fickle, ever changing and always confounding; participants on every level must develop an investment discipline to guide their way. Tweak the strategy that works best for your own style, but playing for open, willing positions in strong trades with little herd interest is a solid framework on which a growth-oriented approach can be built.