I lost a mentor in September. Justin Mamis, who taught me how to formulate and engage my sell techniques, passed away at the age of 90. The lessons he taught me were the foundation for Stage Nine — the art of selling — in our book. I owe him an immeasurable debt of gratitude.
As a young aspiring money manager over 25 years ago, I was very fortunate. Dr. Hank Pruden recommended that I read Justin Mamis' book, When To Sell. To this day, it is one of the essential books I recommend to all aspiring investors. When Grayson and I wrote our book, Tensile Trading, we clearly stood on the shoulders of this Wall Street titan.
Sage advice for all aspiring individual portfolio managers would be to read and reread not only Mamis' book, When To Sell, but the Mark Douglas book, Trading In The Zone, as well. Many readers of Tensile Trading have confessed to Grayson and me that the selling chapter was transformational in their personal investment endeavors. Likewise for the two of us.
When we researched our book, we were shocked by the dearth of credible material on the discipline and techniques of selling. Perhaps the explanation is as simple as Wall Street. The investment community is always yelling "hurrah, hurrah...buy, buy...come on in — the waters fine!" On the other hand, investors are left to their own devices with respect to the sell side. It is precisely for this reason that Justin Mamis earned his reputation as an oracle on Wall Street.
Similarly, in his 2018 book, Muscular Portfolios, author Brian Livingston (also a StockCharts.com contributor) presents conclusive research that supports a Wall Street insider secret. Warren Buffet's superior long term returns are based on his skills in protecting his profits and losing less during market corrections than his outperforming in bull markets. I'm sure he knew Justin Mamis.
An enduring lesson I've embraced is that Wall Street and all the talking heads are populated by a breed of Pinocchios. Whether it's opacity or complexity, I've come to realize that selling based on the unknowable universe of fundamentals is likely to leave one standing last and alone in the party room. Sell on what the price action is telling you. You'll find out why perhaps weeks or months later.
Here are a few sample selling affirmations:
- Fundamentals are fine on the buy-side but they are too late on the sell-side.
- Formulate your selling strategy BEFORE you buy into a position.
- Get your ego out of the way. The markets are always right, so trade what you see in your charts — not what you feel.
- Your personal selling methodology must acknowledge that the markets will gladly continue to offer you more sell-side information, but the cost they charge is a lower exit price.
- Don't make the mistake of trying to get every last drop of a gain from your position. Sell, lock in a profit and move on.
In closing, remember that your sell discipline provides you a significant "odds enhancer" towards achieving a profitable portfolio. If you choose to ignore the market, it will not ignore you. Benign neglect is not an investment strategy.
Justin Mamis: thank you for your many insights. May you rest in peace.
Trade well; trade with discipline!
- Gatis Roze, MBA, CMT
- Author, Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016)
- Presenter of the best-selling Tensile Trading DVD seminar
- Presenter of the How to Master Your Asset Allocation Profile DVD seminar
- Developer of the StockCharts.com Tensile Trading ChartPack