• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock How to Stop the “Wealth Destroyers” by Deploying Your Sell Methodology
Stock

How to Stop the “Wealth Destroyers” by Deploying Your Sell Methodology

by June 14, 2024
by June 14, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

“We are in the business of making mistakes. Winners make small mistakes. Losers make big mistakes.” — Ned Davis

There are zillions of cliches that paraphrase what Ned Davis said. The umbrella axiom with your portfolio should be to cut your losers.

Nude investing is what I label an investor without a formalized selling methodology. I refer to myself as a rational investor, and by that I mean I blend fundamental analysis (particularly earnings) with my technical analysis tools. Doesn’t that seem reasonable or rational? Well, having a specific sell methodology is both rational and necessary.

Not to name names, but I’ve witnessed numerous prominent fundamentally-oriented money managers preaching to individual investors how complex investing is, and, for this reason alone, investors cannot possibly succeed on their own, but should therefore entrust their assets to these fundamentalist managers. Oftentimes, the parallel sermon is that charts and technical analysis is just “hocus-pocus”.

I will concede that, on the buy side, sound fundamentals certainly increase the probability of a profitable investment. On the sell side, it’s tomfoolery for these same fundamentalists to claim this as gospel, because the majority of these same money manager preachers are closet chartists. Shocking, but true. Yes, they use charts to decide when to sell. The reality is that your wealth will get destroyed if you use only fundamentals in your selling methodology. Fundamentals are always late to the sales party. Your charts are real-time.

Sell based on the charts. It’s the foundation of profitable investing. You’ll learn “why” weeks or months after the equity has drifted lower and lower. Once again, sell based on the charts and ask questions later. Protect your profits at all costs. Get your ego out of the way.

As Ned Davis said, we are in the business of making mistakes. It’s to be expected. Just make certain they are small mistakes. Isn’t this a life lesson as well?

So how do you make these SMALL mistakes? To that end, I’ll present four examples of “wealth destroyers” most investors are familiar with. I’ll show you how applying my 3-Peaks selling methodology would have saved your kit and caboodle. In the selling chapter of our book (Tensile Trading), we refer to it as the Beginner’s Sell Methodology. It has three major advantages: it’s simple, it’s clear, and it works.

Here’s the discipline. When an equity makes a new price high, followed by a pullback, and then the next rally in price fails to take out or exceed the previous high in price, we then have in place 2-Peaks. Yellow flags go up at this point because the second peak is lower than the first peak. Subsequently, a red flag goes up when we have a second pullback, followed by a third peak which is even lower than the previous two peaks. This show of weakness and lessening demand for the equity is your red flag signal to get your finger on the sell trigger. Look at the charts below — LUMN, AIG, Citigroup and Walgreens — and this will make sense.

Lumen Technologies (LUMN)

American International Group (AIG)

Citigroup (C)

Walgreens Boots Alliance (WBA)

In a famous interview that Paul Tudor Jones did with Tony Robbins, the Market Wizard famously said that the key to his success was his ability to play defense and get out of losing positions in a timely manner. Paul Tudor Jones had unbelievable success in managing money. He told his college students that one of his key metrics was the 200-Day Moving Average, but we’ll go into that in my next blog. I’ll close with a quote from another great Market Wizard (see Jack D. Schwager’s books on Market Wizards published by John Wiley & Sons), in which Stanley Druckenmiller maintained that “A big part of my process is taking signals from markets. I’ve always believed markets are smarter than I am.” To this, I would add the caveat that charts don’t lie. Learn to trust them.

So here’s your homework for next time. Go to StockCharts.com and the Predefined Scans. Find 50 equities making new lows. Go backwards in time and look at their charts when the equity peaked. Then look for two subsequent lower peaks and identify the point at which you would have sold it. Trust me — this will be an hour of power for you. The insights will be well worth your time!

As you do these exercises, try to get into the mindset that the market is selling you clues. The more clues you buy, the lower the price and the lower your profits. Depending upon the specific equity, these chart clues accumulate in different timeframes. Nevertheless, these little red flags will raise their little red heads — some more quickly than others, which is another clue unto itself about the seller’s urgency. But usually, the 3-Peaks will be clearly visible. When you see the 3-Peaks pattern, don’t just sit there frozen like a deer in the headlights waiting for the apocalypse. This is your call to action.

Remember that profits are the result of two decisions. You can buy wrong and still make money. You can’t make money if you sell wrong. Avoiding financial face-plants is an investment discipline embraced by all the Market Wizards. You need to join the club!

“Markets are never wrong, only opinions are.” — Jesse Livermore

Trade well; trade with discipline!

— Gatis Roze

You Might Also Like
  • Fasten Your Seatbelts: Earnings Season in the Spotlight
  • SP600 (IJR) Silver Cross BUY Signal May Arrive Too Late
  • One Rule to Drastically Improve Your Trading
  • Five Ways You Should Use ChartLists Starting Today!
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Stock Market Pushes Higher, But Is There a Bond Market Surprise Brewing?
next post
How to Stop the “Wealth Destroyers” by Deploying Your Sell Methodology

You may also like

MEM TV: S&P 500 Inches Above Resistance

May 26, 2023

The Ord Oracle: October 18, 2023

October 18, 2023

Pinpoint the Next Buying Opportunity in SPY

April 24, 2024

GNG TV: Growth & Energy LEAD as S&P Chops Around

September 14, 2023

Sector Spotlight: Strong Rotation to High Beta Sectors

March 7, 2023

Week Ahead: NIFTY Draws Closer To Potential Support; RRG Charts...

February 25, 2023

Which Sectors Benefit Most From the Large- to Mid- &...

December 29, 2023

MEM TV: Best Ways for You to Hedge Tech Weakness

September 16, 2023

Market Research and Analysis – Part 3: Market Trend Analysis

March 28, 2024

The 4 Best Tech Stocks to Watch Now!

June 27, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Nike pushes back Skims launch with Kim Kardashian due to production delays

      June 19, 2025
    • The Fed Is Getting It Wrong AGAIN As They Hold Rates Steady

      June 19, 2025
    • DOJ seizes record $225 million in crypto tied to global ‘pig butchering’ scams

      June 19, 2025
    • Feeling Unsure About the Stock Market’s Next Move? These Charts Can Help

      June 18, 2025
    • Amazon expects to cut corporate jobs as it relies more on AI

      June 18, 2025

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 3,598 views
    • 2

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,874 views
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,577 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,541 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,416 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,140)
    • Investing (538)
    • Stock (2,620)

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Nike pushes back Skims launch with Kim Kardashian due to...

      June 19, 2025
    • The Fed Is Getting It Wrong AGAIN As They Hold...

      June 19, 2025
    • DOJ seizes record $225 million in crypto tied to global...

      June 19, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,140)
    • Investing (538)
    • Stock (2,620)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Here’s How To Find The Best...

    January 19, 2025

    Missed Out on Micron’s 112% Surge?...

    March 15, 2024

    Your Weekly Stock Market Snapshot: What...

    June 6, 2025
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here