Re: [CANSLIM] clarification

From: <camelot.homes@charter.net>
Subject: Re: [CANSLIM] clarification
Date: Wed, 12 Dec 2001 21:16:27 -0600
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eric, how do you get the 40% reliability of the WON breakout? david frank
- ----- Original Message -----
From: "Tangen, Eric" <tangene@tycoelectronics.com>
To: <canslim@lists.xmission.com>
Sent: Wednesday, December 12, 2001 8:57 PM
Subject: RE: [CANSLIM] clarification


> Of course you are right...risk is the stop value itself...it is what you
> loose when your stop is triggered. It is what I mean but didn't say
> correctly.
>
> This is what happens when I try to communicate math verbally...the two
don't
> mix. :)
>
> ERIC TANGEN
>
>
>
> -----Original Message-----
> From: John Adair [mailto:xjadair@brightok.net]
> Sent: Wednesday, December 12, 2001 8:48 PM
> To: canslim@lists.xmission.com
> Subject: RE: [CANSLIM] clarification
>
>
> Hi Erick
> If I am reading your post right  correctly you would say your risk
> on a $50
> stock with a $5.00 stop would be  $50.00 -$5.00 or $45.00. If that is what
> you are saying  I would not agree I would say your risk is $5.00  if I
> understand what Tharp suggests. Tharp then limits your risk to  the 1% is
> based on that figure 1% ( 3% for the gunslinger) of your total  capitol.
> John Adair
>
> -----Original Message-----
> From: owner-canslim@lists.xmission.com
> [mailto:owner-canslim@lists.xmission.com]On Behalf Of Tangen, Eric
> Sent: Wednesday, December 12, 2001 7:19 PM
> To: 'canslim@lists.xmission.com'
> Subject: RE: [CANSLIM] clarification
>
> 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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