The acronym CAN SLIM should be changed to MCLINAS, I think, so as to highlight in order the attributes of most importance in finding winning stocks. It wouldn't be as catchy as CAN SLIM, but at least MARKET would have its primary place of importance.
Market: Uptrending ~ "Go Long"; Downtrending "Go Short" or "Stay out"....Period.
Current Quarterly Earnings: 75% or greater
Leadership :Stock and Industry (global, dominant, life changing)
Institutional Sponsorship: Own what the best institutions are accumulating
New: Innovative, life/society changing products and services
Annual Earnings: Best to see big growth as well as some stability over the last few years
Supply and Demand: Volume; newer issues with fewer outstanding shares.
So, how would this work if we followed MCLINAS? Well, the first question we would ask is the following: What is the Market doing~ Is it going up? Are we in a confirmed rally? If "yes", move on to the next letter, C... If "no", then abort search and enjoy other aspects of your life...skiing, fishing, boating......................................something.
(Price, Volume, Base, Chart Characteristics, Entry and Exit Points should be incorporated better as well..but we can save that for later.)
It would save a lot of people a lot of time...and money...and emotional energy if they could just get it through their heads that there are certain periods when you aren't going to make money using traditional CAN SLIM. A large part of the methodology involves staying out of the market. Why is that so hard to understand? Farmers understand this concept. They don't try to grow corn in the middle of the winter.
Stocks of Interest (not necessarily ownership)
Model Stock Chart
This is what we're looking for!
Quote
Blog Archive
About Me
- Solitary Trader
- ohio, United States
- I am a money manager working out of a small cabin on my property. My trading style melds together the market philosophy of Jesse Livermore, Nicholas Darvas, William O'Neil, and many others. I have taken what I learned from them and added to it from my own market observations over the last many years. Before becoming a professional trader, I completed my M.B.A. and spent about eight years doing consulting work with Ernst & Young, Cap Gemini and Deloitte Consulting. Before that, I spent a few years in the seminary studying to be a Priest. My weekdays are spent with my wife and children, and in my cabin, where I study the stock market assiduously. Trading is my passion.
Office
A good place to work
The Inside
I've spent many productive hours in here
DISCLAIMER
21 comments:
I knew in my early can slim training at level 2 class , that they were not stressing the 'M' enough. This is also my beef with the IBD paper, with all the false FTD's that mess up the new folks. They got to change their termonology ( market in confirmed rally????) but in reality means do NOT buy any stocks because Bill's personal Money mgrs. certainly are not if they want to keep their jobs. I know this personally goes on per his own money mgrs telling me. For example last Dec. 07.
ST,it took me awhile to learn that the strength of the overall market trumps everything else.This is why most people won't be successful.They can't sit out the bear markets.
Ron R
I know quite a few people making good money in every market environment. It takes a professional mind set to make it.
Naso,are they good at shorting or daytrading? Very few people are.
Ron R
Naso,
Agreed. You would need to adapt using different strategies, holding periods, etc. You might do some channel trading, a little daytrading, short term momentum trading, shorting, various option strategies, etc. I'm currently undertaking a study of swing trading so as to take more advantage of short term moves and to improve my entries and exits within a CAN SLIM framework. We all need to continue learning and improving, right?
However, a person using pure CAN SLIM can probably do just as well by simply capitalizing on good markets, Letting the market rest (they can rest with the market too, go on vacation, etc.)then do the whole thing all over again a few months or a year later. Success in the market needs to be measured over a span of many years, even decades...not quarters or even 365 days.
Some animals eat every day...they have to... Some gorge and then rest for many months at a time. To each his own. Every trader has different goals.
Some people think that the only goal of a trader it to make as much money as possible all the time. That's not true - those are the thoughts of neophytes who are only able to see a few feet in front of themselves. They have neither the experience nor the wisdom to grasp the larger picture.
When one does this for a living it slowly sinks in that most investors aren't interested in phenomenal returns. They are most interested in preservation of capital and consistent returns.
The point is every trader has different objectives, different strategies, different time horizons, account sizes, needs, wants, desires and so on. If you want to try and make money every day ~ good for you. If you prefer to wait for your particular setups for your strategy ~ good for you.
But no one should have the hubris to think that they are better than someone else because for one or two years they outperformed another person. Only a fool filled with hubris would think that way.
ST,what exactly are you looking at in your study? I always found the shorter term moves more difficult to capture.
Ron R
Actually, Ron, sometimes the shorter term moves are easier to capture. Really "time" is relative. The exact same patterns set up in every timeframe... monthly, weekly, daily, hourly, 5 minute, 1 minute...and they can be traded in any timeframe.
I always use intraday charts (5 minute, 1 minute) to enter longer term positions. I never really worry about my gains during the first two days or so. They will almost always be there. The power behind the moves is so strong that the stock simply can't go down. Every retail guy and institutional trader on the planet wants it. However, come the third or fourth day the position will start retracing, coming back in. That's when things get worrisome - dealing with that first pullback or two on the longer term timeframe. Sometimes I find short term trading a little easier to tell you the truth.
Also, I'm studying swing trading to become more adept at getting into the big winners that I missed on the initial breakout. Sometimes, you miss that first breakout and you dont get the cushion it affords and it can be difficult to find a way in without too much risk. Swing traders are adept at using support for entries.
I've always studied this stuff but I'm just doing it in a more serious way right now.
Met61, They are very short term momentum traders. They go with the flow every day long and/or short. They make a lot more money when the market is up.
ST, I agree with pretty much everything you say. I just wanted to point out the fact that there are people who do well in every market environment. And, none of the successful traders I know think they are better then others. All they think is how to beat the market every day.
Your blog is very educational. Keep up the good work.
ST,are you primarily looking for breakouts on the intra day charts?
Ron R
Naso,
That part wasn't directed to you specifically. It's just that there are people out there, mostly newbie traders who think they are God's gift to trading. They also tend to be very "sectarian" in the the methodology they choose...not accepting anything that is not their own...putting down other ideas... Almost all good traders that have been around a while have the virtue of humility. ..that is, they aren't braggarts...and they are open to other ideas.
Ron,
How do you enter a long term position?
I use intraday charts to pinpoint entries into daily and weekly charts. Every once in a while I'll take some easy short term trades intraday.
ST,i use daily charts to buy a pullback to an area of support or 50 ma.I am trying to use some shorter term charts to be more accurate in my entries,but I am not very good at it.
Ron R
How do you buy the breakout?
Most of the time I wait a day or two until the price consolidates.
Alright. I normally go with the breakout. I use intraday charts to pinpoint the best entries: initial positions, stops, additional positions, etc.
The intraday charts can be traded intraday (some stocks moving hard and fast simply aren't worth owning more than a day or two)and they can also be used for precise entry points. I use intraday support and resistance areas just as you would use daily chart support and resistance.
As I said before, the same patterns form in every time frame. I've seen this from my own studies, but I found it interesting that it became the primary premise for Farley's book, The Master Swing Trader.
I think the key to this volatile market we're in (key word volatile) is to keep your time frame short and take quick profits. Yes this goes against the adage "let your profits run" but we're not in a trending market so the adage "you never go broke taking profits" applies. So here's an example of using intraday charts to make a trade. Yesterday, DRYS was down about 15% in the morning due to bad news and then it based around $12 bouncing off the $12 support area numerous time until finally a bit after 2:30 it broke through the $12 support. Notice after the $12 support was broken that it bounced back up to $12 to give you a good short entry. It quickly sold off below $10.50 for a 10% gain. I couldn't find shares to short to I went long puts. In summary, watch for break of support and make entry on bounce back to support. I would have stopped out had the price jumped back up above $12 on high volume. I should add I was anticipating this to continue to break down because the market was red for the day and sentiment was negative but I waited for the break and rebound to make my entry. Also notice I had the wind at my back with long, intermediate, and short term trends but I'm still quick to take profits because the market is very volatile and now the trade is oversold.
Hi all. Im looking for a track record of the IBD's Big picture "current outlook", ie dates of when they change their reco over the last few years. Do you know where i could find this? Would be great to put this on a chart of the S&P500 for example, with each part coloured accordingly and see how accurate it was (green for market in confirmed rally, yellow for mkt rally under pressure and red for mkt in correction). It would be great visually too.
Gilles
Clint,
Good points. The only danger of course being that once the market does turn a person would continue taking short term profits and miss out on some big longer term gains...habits. But, in reality, an experienced trader would probably note the difference in markets and adjust quickly.
One other thing you did yesterday with DRYS, which you alluded to, was that you chose a very active stock that day that had a definite bias (in the case of DRYS to the downside). So risk to the upside was very limited. The overall market loses its power over such stocks. You could have played ESI the same way yesterday on the long side because it had a bias to the upside and it was also a very active issue due to its earnings and guidance.
Regarding this short term trading business, lots of folks don't like it on principle. It's not pure CAN SLIM, right...
...When I was a kid I had the chance a few times to go to Lake Huron for a couple weeks in August to fish - mostly for big Northern Pike...that's what we wanted, the big fighing fish. When the big Pike weren't biting though, we'd settle for crappies. It's not as much fun fishing for crappies but for some it was better than not being on the water at all.
I still prefer fishing for the Pike and I don't spend much time on the crappies...but every once in a while I'll try to catch a few just for fun.
ST,
That's why I follow your blog, so I'll know when the market starts trending, :-). I try to get a feel for the sentiment of the market to determine it's strength and thus potential for a continued move and I watch the VIX as an indicator of volatility. I would have liked ESI because it's in a relatively strong sector right now but I would have thought twice about going long on such a negative day. On a side note I was disappointed to see APOL off today. Ahhhh, fishing for Pike...I spent part of my youth in northwestern PA and remember well the excitement of catching a Pike and trying not to lose a finger getting the hook out. I understand that catching the big fish is where the big money lies. Perhaps one of these days we'll have a return of the bulls so we can start landing some big fish again. I really do appreciate your blog and your example, it has taught me patience. Good luck in your trading.
Hi guys..
Sorry what I have to say might be abit off from trading and canslim but nevertheless I feel it's relevant.
U know.. US is so debt laden at the moment. There are talks that the dollar is probably going to be devalued as a resort to make the debt manageable... etc etc.
Canslim teaches us to manage the downside risk.
So have you guys ever considered the value of the dollar going way down? Any countermeasure to hedge this risk?
oh hey and jus a thought that came to my mind..
u know.. in the earlier days when majority of the investors are probably not as sophisicated as today, the simpler trend following strategies all work better..
just wondering for the newer countries' stock markets that open. perhaps we can apply those strategies and they may have a higher chance of working.. lol
Post a Comment