Go to Jeff Salisbury LWGate Home Page.From: "Pritish Shah" <pshah@lason.com>
Subject: Re: [CANSLIM] negatives of CANSLIM
Date: Sun, 17 Aug 2003 22:33:43 -0400
Previous Article (by Author): RE: [CANSLIM] RE: BCGI (was: What is your profession?) "Katherine Malm"
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Jeff, I am a statistical kind of person. I like numbers to show whether a system is working or not. I have been on the lookout for making my trades better. To that end, I came across a book called "Encyclopedia of Chart Patterns". According to that book, if CwH is used properly, it has a 95% chance of success. The way this was derived was by doing backtesting on stocks from 1991 to 1996. Of those 95% succeeding, the average gain was 38% with most likely gain of 20%. The results are skewed by stocks with gains of greater than 90%. This CwH system had more stocks that hit 90% gain than any other chart patterns (some 25%+). One of the biggest problems that I was facing was where to place the stop loss. The 74% figure is derived from putting the target price at 50% of the cup depth plus the breakout point. People who have used chart patterns properly have sometimes achieved amazing returns (more than any other kind of technical indicator). There is David Ryan who achieved over 100% gain every year for several years in a row. There are couple other people that have used chart patterns to get gains of over 1000%. There is an interview in Technical Analysis of Stocks and Commodities magazine but I can't find it now. Ofcourse, such returns are exceptional and I do not think I would ever ever reach even 50% average return every year. Tom Worley (one of the major contributors to this forum) had achieved annual returns of 50% plus for the past few years. I wanted to learn from him but he left for heavenly abode earlier than expected. May his soul rest in peace. So it is upto you to refine your system. Think of this as a tool. It is upto you to learn how to use it. Others have used it successfully. Pritish >>> JHend746@cox.net 08/17/03 04:17PM >>> Hi group, I'm glad that we can discuss companies using CANSLIM to evaluate companies, but I was wondering if any of you think there are any negatives to this system (as discussed in HTMMIS). I think it's important to fully evaluate a system, look for any absolutes or conditionals in the system and evaluate it against other options. For example I know CANSLIM works the best during a bull market and we are not in a full fledged bull market right now. Also, as far as using WON's entry signals, specifically the chart patterns, I will quote Tharp from his book, Trade your way to Financial Freedom re:Chart patterns in general "However, such patterns are very difficult to computerize and thus test. In addition when people do test these various patterns, they do not find anyevidence that they increase the reliability of entry signals beyond the 50 percent level." I do not doubt WON's methods, but I believe that skepticism is healthy and that is beneficial to discuss potential flaws in a system. Jeff - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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