{"id":5342,"date":"2024-06-15T00:02:55","date_gmt":"2024-06-15T00:02:55","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/06\/15\/how-to-stop-the-wealth-destroyers-by-deploying-your-sell-methodology\/"},"modified":"2024-06-15T00:02:55","modified_gmt":"2024-06-15T00:02:55","slug":"how-to-stop-the-wealth-destroyers-by-deploying-your-sell-methodology","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/06\/15\/how-to-stop-the-wealth-destroyers-by-deploying-your-sell-methodology\/","title":{"rendered":"How to Stop the \u201cWealth Destroyers\u201d by Deploying Your Sell Methodology"},"content":{"rendered":"
\n

\u201cWe are in the business of making mistakes. Winners make small mistakes. Losers make big mistakes.\u201d<\/em> \u2014 Ned Davis<\/p>\n

There are zillions of cliches that paraphrase what Ned Davis said. The umbrella axiom with your portfolio should be to cut your losers.<\/p>\n

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\u2019t that seem reasonable or rational? Well, having a specific sell methodology is both rational and necessary.<\/p>\n

Not to name names, but I\u2019ve 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 \u201chocus-pocus\u201d.<\/p>\n

I will concede that, on the buy side, sound fundamentals certainly increase the probability of a profitable investment. On the sell side, it\u2019s 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.<\/p>\n

Sell based on the charts. It\u2019s the foundation of profitable investing. You\u2019ll learn \u201cwhy\u201d 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.<\/p>\n

As Ned Davis said, we are in the business of making mistakes. It\u2019s to be expected.\u00a0Just make certain they are small mistakes.\u00a0Isn\u2019t this a life lesson as well?<\/p>\n

So how do you make these SMALL mistakes?\u00a0To that end, I\u2019ll present four examples of \u201cwealth destroyers\u201d most investors are familiar with. I\u2019ll 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<\/em><\/a>), we refer to it as the Beginner\u2019s Sell Methodology. It has three major advantages: it\u2019s simple, it\u2019s clear, and it works.<\/p>\n

Here\u2019s 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.\u00a0This 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 \u2014 LUMN, AIG, Citigroup and Walgreens \u2014 and this will make sense.<\/p>\n

Lumen Technologies (LUMN)<\/span><\/p>\n

American International Group (AIG)<\/span><\/p>\n

Citigroup (C)<\/span><\/p>\n

Walgreens Boots Alliance (WBA)<\/span><\/p>\n

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.\u00a0Paul 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\u2019ll go into that in my next blog. I\u2019ll close with a quote from another great Market Wizard (see Jack D. Schwager\u2019s books on Market Wizards published by John Wiley & Sons), in which Stanley Druckenmiller maintained that \u201cA big part of my process is taking signals from markets. I\u2019ve always believed markets are smarter than I am.\u201d To this, I would add the caveat that charts don\u2019t lie. Learn to trust them.<\/p>\n

So here\u2019s 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.\u00a0Trust me \u2014 this will be an hour of power for you. The insights will be well worth your time!<\/p>\n

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 \u2014 some more quickly than others, which is another clue unto itself about the seller\u2019s urgency. But usually, the 3-Peaks will be clearly visible. When you see the 3-Peaks pattern, don\u2019t just sit there frozen like a deer in the headlights waiting for the apocalypse. This is your call to action.<\/p>\n

Remember that profits are the result of two decisions. You can buy wrong and still make money. You can\u2019t 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!<\/p>\n

\u201cMarkets are never wrong, only opinions are.\u201d<\/em>\u00a0\u2014 Jesse Livermore<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

\u201cWe are in the business of making mistakes. Winners make small mistakes. Losers make big mistakes.\u201d \u2014 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. […]<\/p>\n","protected":false},"author":0,"featured_media":5343,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-5342","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5342","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=5342"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5342\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/5343"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=5342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=5342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=5342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}