Lessons From Dr. Mansi: How to Sell Stocks (Part 1)
Planning your exits and rules for moving up your stops
A few weeks ago, I published my notes on Dr. Mansi’s video on entering stocks from the series on how she trades. Time to get on with the second video: “How I Sell Stocks”.
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Today’s notes cover:
The importance of sell rules;
Planning your exit when entering a trade;
Rules for moving up your stop to breakeven and beyond; and
My suggestions on how to learn from and apply Dr. Mansi’s rules.
Part 2 covers Dr. Mansi’s rules for booking profits and for taking losses, as well as a summary of the video’s key lessons. (Adding them here would have exceeded the email limit, which I’m trying to avoid now after the positive feedback on the multi-part approach.)
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How to learn from these types of videos
Just so we’re clear, I’m not saying that you should copy Dr. Mansi or, for that matter, any other trader. But watching these types of videos by honest, transparent traders that lay out their systems and processes in a lot of detail — which, by the way, are real gems that are extremely difficult to find — are great ways of learning.
At a high level, I believe these videos teach any trader two big things:
The types of factors your own system has to consider or account for.
The general mindset and thinking of an obviously disciplined trader.
For today’s notes specifically, I make some suggestions towards the end of this stack on how you could use Dr. Mansi’s rules outlined here.
The importance of sell rules
Sell rules are even more important than entry rules, because we’re all essentially looking at the same charts and entering at more or less the same time. It’s not difficult to identify the correct buy points. However, to quote Dr. Mansi (0:49):
“What really differentiates a good, consistently profitable trader from one who is consistently losing money is their sell rules.”
Planning your exit when entering a trade
Many traders don’t plan their exits before placing their order — they just blindly enter when a stock breaks out, and only then start thinking about how to exit.
When Dr. Mansi enters a trade, she asks herself a simple question (4:07):
“Is this going to be a position trade, or is it going to be a swing trade?”
To determine the answer to this question, Dr. Mansi has set certain criteria:
Dr. Mansi has visualised her criteria as per the screenshot above, and has also printed them and put them on her desk, so she always knows — as soon as she’s entering a trade — whether to treat the trade as a position (held for multiple weeks or months to capture a bigger move) or as a swing trade (sold into strength after 3–5 days).
This is also something she specifies in her tweets:
Criteria #1 for position trades: major EP
Going through Dr. Mansi’s criteria in more detail, let’s start with the position trades. She gave $PTON on 7 May 2020 as an example of a stock with a major EP (7:02):
An episodic pivot (EP) is a very powerful setup that Dr. Mansi learned from Qullamaggie, who gave a masterclass on them during the 18 May 2023 stream. The term ‘EP’ itself was coined by Stockbee.
EPs occur when a stock has a big gap up on huge volume following some sort of catalyst, like good earnings or other positive news. Whatever the catalyst, it must been a game changer for that company. Only then can it trigger a multi-month move, giving traders like Dr. Mansi the opportunity to hold it for longer and capture a bigger move (i.e. treat it as a position trade).
Criteria #2 for position trades: IPO base breakout
Dr. Mansi also treats recent IPOs that are breaking out of an IPO base as position trades, since institutions usually haven’t piled into such stocks yet.
She gave $DUOL on 1 March 2023 as example (8:51), which reported good news on that day, and had a powerful gap up on big volume. It also looked ready to take out the resistance around the $114 level (which it did the following day, 2 March 2023) — see the screenshot below:
Criteria #3 for position trades: early bull market
Technically speaking, bear markets are defined as a drawdown in the indices of at least 20%. But once the market starts to come out of that bear market and into a new bull market, it usually has the potential to “roar back” with a double, if not more, as illustrated in the screenshot of $QQQ below (10:04):
These huge moves are best captured via position trades, rather than swing trades, which tend to let go of winners too quickly in these types of market environments.
From 12:31, Dr. Mansi discusses the market at the time of the video (April 2023) in more detail on the daily chart.
Swing trading
The three criteria highlighted above are when Dr. Mansi can consider position trading. In all other scenarios, she swing trades only.
She also swing trades when any of the following applies:
The stock is a biotech (14:33).
Dr. Mansi highly recommends this rule for all traders: “if you’re trading a biotech, you only want to be swing trading it”. This is because biotechs can be extremely volatile and unpredictable.
If you need to build portfolio traction (15:50).
If your account has been going sideways or has been in a downtrend, you want to be swing trading only, i.e. quickly booking profits to rack up those gains and start building traction again. This is often the case in late bull markets, choppy markets and bear markets.
As Dr. Mansi explains, our first and foremost job as traders is to build a profit cushion, and only then can we start thinking about holding positions for longer, in the hope of booking larger gains. She also points to another video to learn more about how to practice progressive exposure and keep drawdowns to a minimum, which is the single most important thing in trading — even more so than proper sell rules. You can’t achieve good returns if you’re constantly fighting to get your equity curve back to all-time highs.When there is an upcoming news event (19:00).
Essentially, these events can function as catalysts. At the time of the video, FOMC meetings in particular tend to move the market in one direction or another. As such, if you’re trading at all shortly before such an event, take swing trades only due to the increased risk. And before the actual event is due, play defence — in other words, reduce your exposure and build a cushion. Don’t leave yourself at the mercy of the FOMC.
Dr. Mansi points to the MarketWatch calendar for keeping an eye on such events.
So, to clarify, Dr. Mansi does trade in the above scenarios, but only as swing trades, even if any of her position trading criteria have been met.
Rules for moving up your stop
Moving your stop to breakeven (and beyond) to make a trade “safe”, as Dr. Mansi puts it, enables you to minimise your drawdowns — at least, if you do this right (22:30).
Again, to decide when she moves up her stop, Dr. Mansi has different rules for position and swing trades — see the updated flowchart in the screenshot below:
Position trades: moving to breakeven
For position trades (24:00), Dr. Mansi only moves her stop up after the first ‘natural reaction’ (a Mark Minervini phrase). In other words, she waits for the stock to pull back and make a new low (the natural reaction), and only then moves her stop to breakeven.
As an example, she entered $SE as a position trade on 7 March 2023, when it had an EP — see the screenshot below:
On 13 March, a few days after her buy point, the stock came close to her breakeven point. However, Dr. Mansi didn’t panic and instead waited for the stock to either stop her out at her original stop level, or go higher. Only after the stock took out resistance (the highs of 14 March 2023 — around $78.50), did Dr. Mansi move up her stop.
As she explains, the basic idea is that when you’re position trading — which you should only do when you have decent odds of a multi-week or multi-month move — you don’t want to be too hasty with moving up your stops, or you risk being shaken out of a good winner. When trading on a longer time frame, you must have patience.
Position trades: protecting profits
For position trades, after moving her stop loss up to breakeven, Dr. Mansi trails her stop by continuing to move it up to below each major swing low (natural reaction), as shown by the red circles in the example below (28:55):
Her reasoning is that if a position trade is working, the stock is trending upwards and should be making higher lows. As such, she keeps moving her stop to each higher low.
Swing trades: moving to breakeven
For swing trades (26:01), because Dr. Mansi intends to hold them for 3–5 days only, she doesn’t want to wait for that natural reaction, but wants to sell into strength. With that in mind, she is quick to move up her stop: as soon as she has a 1R paper profit.
For clarity, ‘1R’ means 1x your risk. So if you had a 5% stop loss, and the trade goes up 5%, you’ve secured 1R.
Incidentally, I’ve heard other traders use similar rules for timing when they move their stop up to breakeven — essentially, as soon as they’ve captured a fixed risk multiple (within my circle, 2R seems common), they move up their stop. This doesn’t guarantee them a profit on that trade, but should at least avoid a loss.
My suggestions
Criteria for determining trade type
Remember Dr. Mansi’s question to herself when she enters trades?
“Is this going to be a position trade, or is it going to be a swing trade?”
You don’t need to copy Dr. Mansi’s criteria exactly to answer this question for yourself. In fact, you don’t need to ask this question at all if you don’t trade with different methods. However, if you do, I think Dr Mansi’s approach of writing down her rules and keeping them within close reach when trading a very sensible one.
As to determining your own criteria, Dr. Mansi’s suggestions should help you understand the factors your system should account for, including:
Different setups;
The market environment;
Themes/sectors/industries and other fundamental factors; and
Upcoming news events (e.g. FOMC meetings).
Simply by considering such factors, you are already starting to think much more systematically than the vast majority of traders. In itself, that’s an edge — not one that, on its own, gets you to profitability, but nevertheless an edge.
To figure out your exact criteria, you need to study extensively (which aligns to what Qullamaggie is constantly telling people, too). This doesn’t just help you identify your criteria (and setups), but much more importantly, also have conviction in them. Even the best criteria in the world won’t help you if you don’t truly have conviction in them, because you won’t be able to stick to them during the inevitable tough times.
Rules for moving up stops
What I like about Dr. Mansi’s rules is that they’re very simple, logical and mechanical. As such, they are well-suited to traders still trying to achieve consistency, and also help keep indecision at bay.
Having said that, I don’t recommend following someone else’s rules verbatim. Trading is an imperfect business. No matter what rules you use, you’re always going to be selling either too early or too late. If you trade without your own rules, you lack the genuine, strong belief based on good data you analysed yourself that your rules will, over time, make you money. In other words, once again, you won’t have conviction.
Instead, use rules such as Dr Mansi’s to inspire your own. I think the simple, mechanical approach a great one, but the 1R rule isn’t the only one that fits this bill.
Recently, I wrote a post about calculating your maximum adverse excursion (MAE) — an idea I got from Tom Dante — where you check how far your winners move against you before turning into winners. I see absolutely no reason for using wide stops if your winners typically don’t move far against you before turning into winners. However, the tighter your stop, the smaller the move required to get to 1R, and therefore the likelier that you’ll get shaken out if you follow the 1R rule to the letter.
With that in mind, experiment with similarly mechanical rules on your past trades. What gives you the best return: moving your stop up to breakeven after the stock goes up 1R? Or maybe 2R? Or perhaps a fixed %?
Often, you have some idea of what works for you. But merely thinking or suspecting something isn’t enough to develop the conviction that enables you to stick to those rules during the bad periods. You have to know what works for you, whether based on your own journal or simply by studying hundreds of charts. Ideally, based on both.
To conclude, if you want consistent results (and make life as a trader considerably easier), use simple and mechanical rules that make sense to you. Write them down, keep them on your desk (or above your monitor, or on hand elsewhere), and stick to them.
More content like this
Part 2 is available here, which covers Dr. Mansi’s rules for booking profits and for taking losses, as well as a summary of the video’s key lessons.
Please do let me know what you think of my notes! Leave a comment below, message me on X/Twitter or email me at kayklingson@yahoo.com.
All my Dr. Mansi notes are available here.
The Trading Resource Hub’s full archive is here.