RE: [CANSLIM] New Investors needs help... a short story

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] New Investors needs help... a short story
Date: Tue, 5 Aug 2003 08:46:05 -0500
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Top of Thread: RE: [CANSLIM] New Investors needs help... a short story "Krueger, Kevin"
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Hi Bob,

Welcome to the group.

When it comes to the market, there are many ways to go about making money
and each has their own merits and pitfalls. With CANSLIM, each trader will
develop their own unique set of trading rules and each will use a unique
approach to finding and selecting candidates that best fits their personal
style. These things generally develop over a long period of time as the
trader develops an experiential history.

However, despite the unique approach, the underlying priniciples remain the
same for all CANSLIMers. While the underlying assumptions/principles are
fairly straightforward, collectively, they are unique to the CANSLIM
methodology (as opposed to value investing, short term swing trading, etc):

1. Companies that possess specific growth characteristics are the primary
candidates. Fundamentally, the company must be sound.
2. At any point in time, one can read the market's perception of the
attractiveness of a particular candidate  via the technical price/volume
action in the stock. This always takes precedence over fundamentals, as
fundamental reporting lags.
3. Strong stocks generally get stronger. This strength is used to "draw your
eye" to the right stocks at the right time.
4. Weak stocks generally get weaker. This weakness is used to either
eliminate potential candidates for purchase or for selling a current
holding.
5. Trading time frame is the intermediate term--a few weeks to a few months
under most market conditions. Timing long positions is designed for entering
at a point where risk is as low as possible and at a point where one can
take the biggest ride possible given action in the intermediate term. Exit
(sell) rules are designed to both preserve capital when a stock moves
against you and to harvest profits when the stock is moving favorably in the
intermediate term.
6. Risk is further lowered by restricting entry into long positions to times
where market conditions are most favorable.

I'd say CANSLIM has a particular mindset that is also unique to the time
frame within which one is trading. That is, a stock is a piece of paper, not
the company. Buy it when it's hot, sell it when it's not, then move on to
the next opportunity. This is a world of difference in mindset to Mr.
Buffet, who "buys the company" rather than the paper. CANSLIM is also not
designed to be a frenetic trading methodology where one is flipping stocks
in a matter of a day or two. I think this is probably the biggest mistake
that CANSLIMers make. That is, the intermediate term requires a delicate
balance between exercising patience and keenly recognizing when it's time to
move on.

As with all methodologies, mastery is the key to making consistent profits.
While one can expect to gain a general grasp of the principles fairly
quickly, mastery will take some time. In the interim, Mr. Market will demand
his tuition. That is, a newcomer will make all kinds of mistakes along the
way, none of which should take 50% of his capital, however.  As to choosing
a program or service to support your trading, you're not going to find any
consensus on which is "best" because each trader will have a particular
preference as to how they go about mining for their candidates. The range of
services is extremely broad, but you'll just want to be sure that the tools
you select will allow you to optimize your trading for CANSLIM itself. That
means that you need tools that will give you *both* fundamental and
technical data. Whether that's a combination of several tools and services
will be up to your personal style, the time you have avaiable, and the money
you're willing to spend in exchange for less time spent.

You might take a look through our list FAQ, as we've accumulated quite a few
links to resources given the contributions of our members over the years:

http://WallStreet-LLC.com/canslim/CANSLIMFAQ.zip

Katherine


- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of
RSCARDAMALIA@EMPIRE.STATE.NY.US
Sent: Monday, August 04, 2003 1:35 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] New Investors needs help... a short story



I'm another newbie to this list and investing in general so you old-timers
will probably get tired of us quickly!

My previous experience has been with mutual funds and the "buy and hold"
philosophy that lost me 50% over 2001 and 2002. I've recently taken more
interest in the market as a friend was turned onto a technical analysis
program called Vector VST. I started doing some exploring on the net and
found many other technical systems which lead me to this group.

I'm assuming the software programs are twists on the same techniques but am
interested in any reviews/recommendations you experts have. My short
research also tells me you can't simply rely on the buy, sell, hold
recommendation of a computer but rather still need to do your own analysis
and "develop your own method". No get rich quick scheme here but the
learning curve seems impossibly high. Have ordered the O'Neil book to start
some reading. Can one expect to grasp enough in a few weeks to begin
investing with a level of confidence?

Bob Scardamalia


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