Does anyone do CANSLIM by-the-book?

[MaudMan]

I'm pretty new to active trading and really like the CANSLIM concept. Of course, I'm still trying to figure out how to prevent every stock I buy from backsliding... It's like the midas touch, only in reverse!

Anyway, I'd love to talk to some people who are actually doing CANSLIM "by the book" so to speak. It seems that every person I meet through my research into CANSLIM and IBD had started with CANSLIM at one point, but moved onto doing their own thing. People either say they no longer like CANSLIM or prefer not to use IBD, or don't like the idea of buying stocks breaking into new high ground, and so on...

I'm hoping that, in a CANSLIM forum, I can find at least one person who has a long term CANSLIM success story and is still doing it according to the way it is taught in the books and in IBD. Please offer me some hope that this trading/investing strategy really works!

Anyone?? I'd love to chat!

Dave

 

[ajaskey]

Anyway, I'd love to talk to some people who are actually doing CANSLIM "by the book" so to speak. It seems that every person I meet through my research into CANSLIM and IBD had started with CANSLIM at one point, but moved onto doing their own thing. People either say they no longer like CANSLIM or prefer not to use IBD, or don't like the idea of buying stocks breaking into new high ground, and so on...

Dave,

"By the book" isn't all that clear. It takes several readings of the How To Make Money In Stocks to grasp the simplicity of the concept. People reading it today, after a year of trying to follow the methodolgy, will find some nuance they missed before. Or they will find they misunderstood something completely. Everyone is different, but even seasoned pros say they get something new from the book each time they read it. The biggest problem people have is to make it overly complex and lose sight of what they are trying to do - make money.

I see the book as having layers with the important layers being:

• Invest only during bull markets.
• Find the best fundamental stocks with big demand for little supply.
• Hold the winners through the bull market until they top out.
• Sell the losers quickly and get back into a winner.

The secondary layers tell how to find the best fundamental stocks and when to buy them. But these are only suggestions based on historical data. For example, there is no cutoff for earnings growth or ROE. The suggestion is 25% growth and a ROE of 17 at a minimum. But there is no clear rule saying not to buy 16% growth and a 13 ROE because the stock could breakout today in front of earnings and have superior fundies too late to buy.

I have found that ignoring all but a couple of the rules and screening for stocks with the best Float/ADV, high RS, and positive ROE will find stocks that meet most/all of the the other rules. Just as the book says, the best performing stocks have great demand for the supply and great fundies. Look for the best performing stocks and you will find those with the best fundies. The stocks with great "looking" fundies and weak performance usually are stocks with false fundies.

These are my views. I am interested in continuing this thread with whatever questions/comments/suggestions you (or others) want to post.

Andy

 

[MaudMan]

Thanks for the response Andy. Although, you didn't really say whether or not you follow CANSLIM's methodologies... I guess based on a few of your comments, I can assume you took some good over-arching rules from the book and then sort of came up with your own style after that.

The problem I'm seeing is that by the time a stock is featured in IBD it's already too late to take a position before a nice break out. Either that or I just haven't figured out how to time my entries correctly. I'm also having a very hard time with the concept of buying high priced stocks that are breaking into new high ground.

I like lower prices, no more than $10-$15 per share, because I can buy more for my money and make more on the trade. If I can buy 500 shares of a $10 stock and it makes a 2 point move, I've done considerably better than if I had bought 100 shares of a $50 stock and it makes the same 2 point move.

Is my thinking flawed? And if so, somebody please explain why?

I'm sure everyone has figured out I'm a novice at this. I've been "investing" for over 16 years in mutual funds and just recently got the itch to be more active. I don't (ever) see myself as a day trader or swing trader, which is why CAN SLIM is very appealing to my needs. Hopefully things will get a lot easier and a lot clearer as time goes on and I continue to read the book(s). I have all of O'Neil's books and always carry one on the bus with me on the way to work so I can extract some new nuggets of wisdom.

So, does anyone here actually subscribe to and read IBD every day? Do you find it useful in selecting new trades?

Dave

 

[MaudMan]

One other comment... Perhaps IBD's real value is in being able to keep in tune with the overall markets and business news. Although, it's pretty expensive considering all the same business/market news is available at dozens of free websites. However, I do like the unique spin IBD puts on the news, and always ties everything back to the strategy taught in O'Neils books. Staying up to date and aware of major changes in market trends is invaluable (IMHO).

 

[ajaskey]

Thanks for the response Andy. Although, you didn't really say whether or not you follow CANSLIM's methodologies... I guess based on a few of your comments, I can assume you took some good over-arching rules from the book and then sort of came up with your own style after that.

Sorry about that. Yes, I do follow the CANSLIM methodology - meaning I buy the best stocks as they are making their big move and hold the strongest thru minor corrections. My point was that people get tied up in selection criteria when the best fundamental stocks will also be the best low Float/ADV and high RS stocks. Check out HANS, TZOO, and TASR from the past couple of years - low float and big volume - with the best fundies at the time.

Andy

 

[ajaskey]

The problem I'm seeing is that by the time a stock is featured in IBD it's already too late to take a position before a nice break out. Either that or I just haven't figured out how to time my entries correctly. I'm also having a very hard time with the concept of buying high priced stocks that are breaking into new high ground.

Check the IBD 200 (a newer feature) that I've seen at least once a week - maybe more often. The best stocks will be in there. Also check the high rated stocks under $10. Once a bull move starts - like at the beginning of May - the best stocks will be gone. So it is best to find them during the weaker market times.

Andy

 

[ajaskey]

I like lower prices, no more than $10-$15 per share, because I can buy more for my money and make more on the trade. If I can buy 500 shares of a $10 stock and it makes a 2 point move, I've done considerably better than if I had bought 100 shares of a $50 stock and it makes the same 2 point move.

That may work for a trade, but it isn't CANSLIM. CANSLIM is about 10+ point moves. The best can go up 100s of points in a long bull market. Some of the best professional day/swing traders I've studied like stocks over $30 (and over $50) because they are more apt to give a $5-10 move where a $7 stock will move a point or two.

Andy

 

[LevII]

I like lower prices, no more than $10-$15 per share, because I can buy more for my money and make more on the trade. If I can buy 500 shares of a $10 stock and it makes a 2 point move, I've done considerably better than if I had bought 100 shares of a $50 stock and it makes the same 2 point move.

Is my thinking flawed? And if so, somebody please explain why?

That thinking is fundamentally flawed.

You should be thinking in percentage moves not point moves. Imagine a company has 2 differently priced sets of shares, one priced at $5 the other at £100. If the price rises x% in a day both the $5 & $100 stock will rise by x% and your return will be the same.

 

[MaudMan]

Check the IBD 200 (a newer feature) that I've seen at least once a week - maybe more often. The best stocks will be in there. Also check the high rated stocks under $10. Once a bull move starts - like at the beginning of May - the best stocks will be gone. So it is best to find them during the weaker market times.

Andy

Yes, I discovered the under $10 list the other day! I've been using that to identify lower priced candidates. Now I just need to hone my chart reading skills to identify pivot points. I've been reading and re-reading those chapters!

Dave

 

[MaudMan]

That thinking is fundamentally flawed.

You should be thinking in percentage moves not point moves. Imagine a company has 2 differently priced sets of shares, one priced at $5 the other at £100. If the price rises x% in a day both the $5 & $100 stock will rise by x% and your return will be the same.

Well, that's not the first time my thinking has been flawed!

It does make sense to think of it more in terms of percentage gain instead of price. Having said that, I STILL like the lower priced stocks - in the $10-$15 range. I think around $10 with good fundies is when the big boys start to sit up and take notice. I read that somewhere, I think in O'Neils FAQ's on investors.com.

 

[MaudMan]

Maybe some of the more advanced CANSLIM'ers could look at these charts and tell me what you think. I got them from the IBD < $10 list and they all have very strong fundamentals. However, if I'm looking at the charts correctly, they all appear to be over extended and need to pull back a bit before a buy:

QDEL, MESA, PETS, ERS, ENG, CTGI

Dave

 

[MaudMan]

BTW Andy, I LOVE the growth picks you post on your site! I had no idea you could pass multiple symbols into stockcharts.com like that - it's awesome! That also makes it pretty simple to quickly scan the charts to look for breakout patterns.

Dave

 

[ajaskey]

Having said that, I STILL like the lower priced stocks - in the $10-$15 range. I think around $10 with good fundies is when the big boys start to sit up and take notice. I read that somewhere, I think in O'Neils FAQ's on investors.com.

The problem I've found is the almost all retail investors think the same way. When you see a stock with a nice base priced around $10, you can't tell if it is big money or a lot of small money building the base. If you find a nice base on a $50 stock, there is a much larger possibility that the big boyz are buying it - and not a lot of little boyz.

Andy

 

[MaudMan]

The problem I've found is the almost all retail investors think the same way. When you see a stock with a nice base priced around $10, you can't tell if it is big money or a lot of small money building the base. If you find a nice base on a $50 stock, there is a much larger possibility that the big boyz are buying it - and not a lot of little boyz.

Andy

So again, I'm being told my thinking is flawed...

LOL

I'm starting to come around, but it's going to take a lot of undoing of years of incorrect information. The vast majority of people think the way I do, which is probably why so few actually make money in the stock market.

Dave

 

[bludmonkey]

One small thing , I figured i'd post here. if your focusing on the strongest sectors, and the big dogs have left the building so to speak, you might scroll down through the rest of the stocks in the sector. Sometimes
there is a stock in a fairly long consolidation period which tends to put a damper on the relative strength.
they tend to break out with the next pull back or reversal so you might want to be a little forgiving on the whole rs thing.

 

[kevint]

CANSLIM.net has done it by the book since 1996. We offer many FREE TOOLS for investors following this fact based system and invite anyone interested to check us out.

We have both pay and free memberships which are designed to foster learning by example.

Kind regards,

Kevin Thomas
http://www.CANSLIM.net

 

[safvan]

Canslim works only in bull markets and thats what it is designed for which means you buy good companies with good past earnings in september or october and keep them until may and april the next year as long as the main S&P is in a bull phase.

That is pretty much it on the basic level and how most should be investing any way.

 

[WSL]

Canslim works only in bull markets and thats what it is designed for which means you buy good companies with good past earnings in september or october and keep them until may and april the next year as long as the main S&P is in a bull phase.

That is pretty much it on the basic level and how most should be investing any way.

My apology for objecting, but this is not true. CANSLIM works in any market, but it works phenomenal in a bull market.

 

[bonchi07]

I'm pretty new to active trading and really like the CANSLIM concept. Of course, I'm still trying to figure out how to prevent every stock I buy from backsliding... It's like the midas touch, only in reverse!

Anyway, I'd love to talk to some people who are actually doing CANSLIM "by the book" so to speak. It seems that every person I meet through my research into CANSLIM and IBD had started with CANSLIM at one point, but moved onto doing their own thing. People either say they no longer like CANSLIM or prefer not to use IBD, or don't like the idea of buying stocks breaking into new high ground, and so on...

I'm hoping that, in a CANSLIM forum, I can find at least one person who has a long term CANSLIM success story and is still doing it according to the way it is taught in the books and in IBD. Please offer me some hope that this trading/investing strategy really works!

Anyone?? I'd love to chat!

Dave

I follow Can slim but use it on a day trading system. I follow the same principles on how to spot the best stocks and look at 5 minute and even 1 minute patterns. I sometime will hold a stock for a few days but mostly I am in cash at the end of the day. I have made this system work for me as a day trader. The idea is the same, what changes is the how long do you dold the stock for and what your indictors are.
I highly recommend Can Slim. You will need to read that book a couple of times and really learn to study the charts. I have found that mastering that is the key!
I hope it helps!!!