Go to Jeff Salisbury LWGate Home Page.From: "Jeff Mulder" <jeff@mulder.com>
Subject: Re: [CANSLIM] negatives of CANSLIM
Date: Tue, 19 Aug 2003 23:34:47 -0400
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<< 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. >>
Your paragraph above uses a quote from Van Tharp's book to suggest that =
a reliability rate of 50% is a potential flaw in the CANSLIM system. =
Please remember, however, the primary theme of the Tharp book: =
Expectancy and frequency are the keys to system profitability, not entry =
reliability.
Research into the expectancy of CANSLIM systems will reveal much more =
about potential flaws than analysis of entry reliability. Drawdowns are =
another potential flaw. You may want to investigate the size and =
duration of drawdowns within CANSLIM systems as well.
A couple weeks ago, Katherine Malm published links to the AAII's annual =
summaries of performance for several dozen stock screens. The CANSLIM =
screen is the second most profitable screen tracked by AAII. =
Interestingly, the screen removes the technical entry (CWH breakout) =
many CANSLIMmers consider crucial to their systems. Instead, the =
portfolio simply rebalances on a monthly basis across however many =
stocks meet the screen's requirements. Despite being fully invested at =
all times, and despite buying stocks extended well beyond their pivot =
points, the screen has delivered positive returns in all of the last =
five years. =20
If you research historical holdings within the AAII CANSLIM portfolio, =
you'll see that their entry reliability is below 50%. Even with that =
potential flaw, the screen has a 5-year cumulative return of 350% =
through 2002.
- - Jeff
----- Original Message -----=20
From: Jeff Henderson=20
To: Canslim=20
Sent: Sunday, August 17, 2003 5:17 PM
Subject: [CANSLIM] negatives of CANSLIM
Hi group,
=20
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.
=20
Jeff
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<DIV><FONT face=3DArial size=3D2><< Also, as far as using <SPAN=20
class=3DSpellE>WON=92s</SPAN> entry signals, specifically the chart =
patterns, I will=20
quote Tharp from his book, <U>Trade your way to Financial Freedom</U> =
<SPAN=20
class=3DSpellE>re<SPAN class=3DGramE>:Chart</SPAN></SPAN> patterns in =
general=20
=93However, such patterns are very difficult to computerize and thus =
test. <SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>In addition when people do test =
these=20
various patterns, they do not find <SPAN =
class=3DSpellE>anyevidence</SPAN> that=20
they increase the reliability of entry signals beyond the 50 percent=20
level.=94<SPAN style=3D"mso-spacerun: yes"> </SPAN>I do not doubt =
<SPAN=20
class=3DSpellE>WON=92s</SPAN> methods, but I believe that skepticism is =
healthy and=20
that is beneficial to discuss potential flaws in a system. =
>></FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Your paragraph above uses a quote from =
Van Tharp's=20
book to suggest </FONT><FONT face=3DArial size=3D2>that a reliability =
rate of 50% is=20
a potential flaw in the CANSLIM system. Please remember, however, =
the=20
primary theme of the Tharp book: Expectancy and frequency are the keys =
to system=20
profitability, not entry reliability.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Research into the expectancy of CANSLIM =
systems=20
will reveal much more about potential flaws than analysis of entry=20
reliability. Drawdowns are another potential flaw. You may =
want to=20
investigate the size and duration of drawdowns within CANSLIM systems as =
well.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>A couple weeks ago, Katherine Malm =
published links=20
to the AAII's annual summaries of performance for several dozen stock=20
screens. The CANSLIM screen is the second most profitable screen =
tracked=20
by AAII. Interestingly, the screen removes the technical entry =
(CWH=20
breakout) many CANSLIMmers consider crucial to their systems. =
Instead, the=20
portfolio simply rebalances on a monthly basis across however many =
stocks meet=20
the screen's requirements. Despite being fully invested at all =
times, and=20
despite buying stocks extended well beyond their pivot points, the =
screen has=20
delivered positive returns in all of the last five years. =
</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>If you research historical holdings =
within the AAII=20
CANSLIM portfolio, you'll see that their entry reliability is below =
50%. =20
Even with that potential flaw, the screen has a 5-year cumulative return =
of 350%=20
through 2002.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>- Jeff</FONT></DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3DJHend746@cox.net href=3D"mailto:JHend746@cox.net">Jeff =
Henderson</A>=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
href=3D"mailto:canslim@lists.xmission.com">Canslim</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Sunday, August 17, 2003 =
5:17=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] negatives of =
CANSLIM</DIV>
<DIV><BR></DIV>
<DIV class=3DSection1>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Arial">Hi=20
group,<o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"><o:p> </o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Arial">I=92m glad that we can =
discuss=20
companies using CANSLIM to evaluate companies, but I was wondering if =
any of=20
you think there are any negatives to this system (as discussed in =
HTMMIS).=20
<SPAN style=3D"mso-spacerun: yes"> </SPAN>I think it=92s =
important to fully=20
evaluate a system, look for any absolutes or conditionals in the =
system and=20
evaluate it against other options. <SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>For example I know CANSLIM =
works the=20
best during a bull market and we are not in a full fledged bull market =
right=20
now.<SPAN style=3D"mso-spacerun: yes"> </SPAN>Also, as far as =
using <SPAN=20
class=3DSpellE>WON=92s</SPAN> entry signals, specifically the chart =
patterns, I=20
will quote Tharp from his book, <U>Trade your way to Financial =
Freedom</U>=20
<SPAN class=3DSpellE>re<SPAN class=3DGramE>:Chart</SPAN></SPAN> =
patterns in=20
general =93However, such patterns are very difficult to computerize =
and thus=20
test. <SPAN style=3D"mso-spacerun: yes"> </SPAN>In addition when =
people do=20
test these various patterns, they do not find <SPAN=20
class=3DSpellE>anyevidence</SPAN> that they increase the reliability =
of entry=20
signals beyond the 50 percent level.=94<SPAN style=3D"mso-spacerun: =
yes"> =20
</SPAN>I do not doubt <SPAN class=3DSpellE>WON=92s</SPAN> methods, but =
I believe=20
that skepticism is healthy and that is beneficial to discuss potential =
flaws=20
in a system.<o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"><o:p> </o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: =
Arial">Jeff<o:p></o:p></SPAN></FONT></P></DIV></BLOCKQUOTE></BODY></HTML>=
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