When to Sell

Insight from the book, When to Sell, by Justin Mamis.

I highly recommend the book to every reader of this blog as I must include it as one of the better books I have ever read on the subject. Details of his selling techniques can be found in the book; today I will only share some of his notable wisdom (things we should all be familiar with but must be reminded about every now and then).

All quotes below taken from the book: When to Sell

  • Why do so few books exist on the subject of “How to Sell”?
    Selling techniques are far more complicated than buying techniques and subject to considerably more emotional pressure, than those of buying.
  • Buying is easy because many signals flash to enter a particular stock or market. However, few moments cry out for selling at precisely the right time and no simple way to lick emotions that hinder cutting the cord.
  • The formidable psychic struggle – to sell or not to sell – somehow invariably produces the wrong decision, selling prematurely when the advance has much further to go, and, having made that mistake often enough to decide it was a mistake, to leap to the other extreme with other holdings and refuse to sell at all after the top has arrived.
  • Stock market analysis is the task of separating real possibilities from mere hopes.
  • Rule One of the professional trader is: When a stock doesn’t do what you expect it to do, sell it.
  • When looking for sells signals: Once a day, once a week, in fact, should be ample when you know what to look for and what to do.
  • It is our expectations, our needs, which keep us from seeing things as they really are, and that includes recognizing that things are not going as we had dreamed they would.
  • With proper discipline and intelligent observation of the information that’s available, you ought to be able to make more money than you lose and in the stock market, that’s the only measure of being right.
  • We’ve been brought up to believe that there is a right and a wrong about everything. But there is no such absolute in the stock market. The only way to win at this game is to be consistent.
  • Well, if there is no perfect time to sell, no absolutely right end-of-the-rainbow moment, the important task is to avoid the wrong time.
  • Typically, the way institutions buy their stock is to try to accumulate it bit by bit. The order on the exchange floor is usually filled over a period of time, as they gather in the desired number of shares while trying to keep the price from leaping until they’re done. But when they do their selling, they are not so patient; having accumulated those thousands of shares, institutions usually want out as soon as the decision to sell is made.
  • The decisive act of selling may turn out, with hindsight, to be a mistake, but the indecisive act of not selling can turn out to be a disaster.
  • One of the single most important distinctions to understand about the market is that you are never buying or selling a company; you are bidding and offering in an auction of its shares.
  • To paraphrase the gambler: If you’ve never lost any money in the market, you’ve never played the game.
  • But what makes selling far more difficult than buying is that tops don’t provide comparable conveniences.
  • Stocks are bought not in fear but in hope. They are typically sold out of fear.

About Justin Mamis:
Justin Mamis independently publishes The Mamis Letter weekly, as well as other opinion products. Quotes from The Mamis Letter have appeared frequently in Barron’s and the Wall Street Journal, and his often heretical and usually grumpy comments have been heard from time to time on CNBC.

After serving as Assistant Director of the NYSE Floor Department, Justin Mamis founded the Professional Tape Reader in 1972, selling it in 1977 when he thought he was going to retire. Getting bored, he returned to New York as an “upstairs” Member-Trader for Phelan, Silver – a NYSE specialist firm – and subsequently spent several not particularly skillful months as an options trader on the AMEX floor, before gradually settling into his role as market advisory letter writer, forecaster, and philosopher on behalf of, in succession: Wertheim & Co., Cowen & Co., Gordon Capital, and Hancock Institutional Equity Services. In that time period, he was regularly elected to the Institutional Investor “All-Star Team” in the categories of Market Timing and Market Technician. Since 1996, Justin has provided his opinions to institutional investors via his independently-owned company, Noah Financial, LLC.

Justin has been a prolific writer in the business and investing arena. The original edition of When to Sell was first published in 1977 (Farrar, Straus & Giroux); it was updated (Third Edition) in 1999 and published by Fraser Publishing (www.fraserpublishing.com). When to Buy was published by Farrar, Straus & Giroux in 1982; a Second Edition was published in 2001 by Fraser. His personal favorite – because it is more philosophical in tone – is The Nature of Risk – Stock Market Survival &. The Meaning of Life (published in 1991 by Addison Wesley, and updated from the original publication by Fraser Publishing in 1999). A self-published (in 1995) collection of “Ten Sermons by a Non-Rabbi” includes a “Stock Market Sermon.”

Comments

  1. A superb book indeed, Chris, and one I frequently find myself recommending. Personally, I think 95 % of investors would be better off spending less time thinking about setups and more time thinking about exits and the management of existing positions.

    Each month I find more and more on this site that I enjoy. Keep up the good work!

    -Bill

  2. Bill,
    Thank you and I agree 100%. Too many books and too many investors focus on buying the “right” stock at the “right” time. That’s the easy part. Selling is where most people destroy their chances of ever making it consistently.

    It was an excellent book!

  3. Still a favorite as well…I met him once on the Raritan Valley line train (he got off in Plainfield) and I was a young pup reading “Technical Analysis of Stock Trends”; 1985 and heading towards Somerville, NJ. He drew his charts by hand.

  4. Thanks for sharing this Chris , I’ll have to pick up a copy. Now if I can only get through the handful of books piling up around me!

    Agree, selling is much more difficult than buying and its a question I get often. For me, I look for certain technical requirements that may indicate a sell signal such as diminishing buy volume, hitting the top of a trend, a high volume reversal but it really is more art than science on the sell side. You can be somewhat mechanical on your entries, but on your exits I think it’s a mistake.

  5. I have never read or heard of this book, but it looks like a very interesting book. I like the point that real possibilities must be separated from simple hopes.

  6. L. Thompson says:

    Gosh Chris,
    At times you be da’ sphinx, bebe!
    L.

  7. Hey Chris I may have missed it but much of what is written as you say is 5 yrs ago.I have read “Financial Armagedon” that is a bit extreme but i beleve VERY real. Unfortunately so many authors lack describing good safe places to invest. So what is the best book(s) that show how we can FIND a financial advisor who understands with ALL the corruption,greed,theft,pork belly & out of control spending by Gov’t we are on our way as General David Walker Head U.S. Comptroller says, a financial cliff. Also books that say specifically how to SAFELY invest our money and perhaps a country that is a “safe” haven to invest in. Or worst case, a better place to move too during a depression? At 52yrs I’ve seen my net worth go from 1.2mil to only 500k can’t find a career or business to get into. And I need an Advisor/Consultants place to invest my money so I have something coming in. Thanks Kelly in Mpls,Mn

  8. Kelly,
    You say:
    “I’ve seen my net worth go from 1.2mil to only 500k can’t find a career or business to get into.”

    This is going to be harsh but I am going to have to tell you to look in the mirror and take FULL responsibility for the loss in your account. As for the job, gain further education and look for a new career or start a business and control your own destiny.

    My net worth, income and opportunities have all grown over the past 5 years so what you say only applies to those that believe so negatively. We all create our own destiny. Blame is a loser’s game. I can’t recommend an advisor because I invest my own money because I don’t trust others.

    This may sound harsh but it the truth. Wake up and change course and create your own opportunities for your investments, your career and you outlook in general. We are what we think and DO! If you think negative and plan for the negative, negative things will happen.

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