What is your opinion of CANSLIM?

T

trendisyourfriend

For those of you who read Investor's Business Daily, what do you think of CANSLIM for trading?

I spoke with one trader and he said he lost a lot of money trading using CANSLIM.

I have a different perspective though. I'm up 57% for the year by buying growth stocks breaking out of bases on heavy volume during bull markets (ie when the BIg Picture says it's safe to buy stocks).

What do you guys think of CANSLIM? Is it too restrictive?
 
It's a good book overall, good intro for newbs, plenty of valuable tips & thoughts, but woudn't follow it blindly. None of the books should be followed blindly.

Keep the tips in mind, but continue practicing.
Mix it up with you own experience & skill. Adjust.
 
In fairness to a canslim approach the ETF tracks the IDB index and is required to be invested in equities with a maximum cash position of 50%. The retail investor can take their losses and be 100% in cash in a down market.

I'm not sure what the criteria is to be in the index or how often they rebalance. Another advantage for the retail trader is the ability to move quickly.

Finally the index is comprised of 50 stocks. The canslim approach recommends no more than 8. Diversification leads to average performance.
 
FFTY as a mid-cap growth fund doesn't even outperform the MDY (S&P Midcap ETF) so it is useless. MTUM is probably better if you want momentum.

O'Neil's strategy is sound but I think its isn't as straight forward as following a ruleset to pick stocks. I still think the godfather of this strategy is really Nicolas Darvas. I prefer Darvas' strategy of buying stocks at all time highs that are in futuristic sectors.

To my knowledge the really big gainers from the last 2 market crashes tend to be some futuristic business (Tesla, nVidia, Roku, Shopify, etc.). The only exceptions I can think of is Chipotle or Domino's Pizza but even these companies benefited greatly from technology.

Darvas' money management was nonexistent so he was lucky he invested in the boom time of the 1950s, but he did have hard rules for exiting positions like when the stock went below the "Darvas box."
 
I did CANSLIM for some time, also used their MarketSmith service, but ultimately found it difficult to trade as it takes quite a long time to see if it works. Their market timing model gets quite choppy occasionally. Backtesting their model is nearly impossible because of data requirements.

It is one of the few things that still sound fairly credible to me, it just wasn't something I could follow blindly because of the above. Ultimately moving into way shorter term systematic trading, where I could validate systems myself and get live feedback way faster because trades count is much higher.
 
I tried to combine CANSLIM with long options...did not work out so well. Was also using MarketSmith which really makes it a lot easier...It is just set up really nicely displaying sales and growth qtr to qtr. I liked several features but ultimately cancelled when I stopped using that system. I think it would work better trading equities as it was intended but still I dont see it as exceptional.

Its good as it helps give you a pretty solid method to select the underlying and picking direction (i would often use basically a reverse CANSLIM looking for consistent sales decrease etc to buy puts)...but all of the fundamental trading skills are still very much needed...proper position sizing, patience (including overtrading), cutting losers, having greed in check on winners, discipline to follow your rules, etc...If these (and others) are not well developed then Im not so sure that it matters at all what method you use.
 
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