RE: [CANSLIM] clarification

From: "Tangen, Eric" <tangene@tycoelectronics.com>
Subject: RE: [CANSLIM] clarification
Date: Wed, 12 Dec 2001 20:19:23 -0500

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The latter....your risk is your buy price less the stop. Rule of thumb: that
number should be 1% or less of your total trading capital. So if you want in
on a more volatile stock, just buy less of it...but don't set the stop at
7-8% if the stock has a 10% daily trading range - another point HTMMIS
doesn't address.

Trading any system with a 7-8% risk for each trade is a receipe for
disaster. The pros use a 1% limit. If (as in HTMMIS suggest) you split up
your capital evenly amoung 5-6 stocks and used an arbitrary 7-8% stop loss,
statistically, it would be very easy to get enough losing trades to loose
all your money. The unspoken 40% reliability of the WON breakouts only makes
this bad situation worse.

I'm afraid that a quick reading of HTMMIS gives the impression that if you
can identify the perfect C+H setup and all the other CANSLIM criteria are in
place, you can get darn near 100% reliability of a breakout. I have a big
problem with that.

I'm not down on CANSLIM...just like people to know the reality of the
situation. Your going for home runs here and home run hitters have a lot of
strikeouts.


ERIC TANGEN

- -----Original Message-----
From: Katherine Malm [mailto:kmalm@earthlink.net]
Sent: Wednesday, December 12, 2001 2:02 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] clarification


>>If you put 7-8% of your trading capital
> at risk on any one trade

Now that I've been mulling over your comment, it begs another question. Are
you suggesting the *total* monies invested in a trade are "at risk"? Or the
amount which you've specified in downside stop-loss protection as "at
risk."?

Katherine


- ----- Original Message -----
From: "Tangen, Eric" <tangene@tycoelectronics.com>
To: <canslim@lists.xmission.com>
Sent: Wednesday, December 12, 2001 1:46 PM
Subject: RE: [CANSLIM] clarification


> Welcome to the club! Breakouts are a high risk and high reward strategy -
if
> you're batting .500, that's pretty darn good. You should expect 40%
success
> at finding successful breakouts long-term.
>
> I just have to get this off my chest for the new subscribers...WON's 7-8%
> stop below the pivot is a technical stop. It is a rule of thumb based on
> volatility in the handle region before a stock takes off.
>
> It is NOT A MONEY MANAGEMENT STOP!. If you put 7-8% of your trading
capital
> at risk on any one trade, you will eventually pay some really serious Wall
> Street tuition on the path to becoming successful trader.
>
> WON's work has virtually nothing in the area of money management (what he
> does say is just plain outdated...by 5 stocks with 100k...more appropriate
> to an era of high commissions and lower volatility).
>
> Tharp's books are the best (only?) work in this area and should be
required
> reading before you head out to the great casino that is Wall Street.
>
> ERIC TANGEN



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