Years ago, there was an approach called "Rational Investing". Basically, it used fundamentals to select stocks and technicals to enter and manage the trades. This of course is also the basic concept of CANSLIM, but where CANSLIM is far too vague, particularly for beginners, and assumes a great deal from conclusions drawn through logical fallacies, RI can be as specific as you like. Unfortunately, "rational investing" has lost most of its original meaning, perhaps since no one (with the possible exception of John Bollinger) championed it. And IBD became a juggernaut since it enabled beginners to think they were playing the markets without doing any actual work. There is an RI portfolio being maintained at MSN, but the choices he makes for fundamental selection and technical management need not be the defaults. Therefore, I suggest that if you want to make the most out of "CANSLIM" that you focus instead on the basic concept of selecting stocks through a set of fundamental measures that you think are valid (you can also use a canned scan from Reuters or MSN), then apply what you know about technicals in order to obtain the best entry point and manage the trade according to what you've found to be most beneficial to you (RI, for example, allows you to buy low, not force you to wait for new highs).
What I should also add is that CANSLIM is for INVESTING, not trading. You need to be able to allow 7% stops and hold for weeks or longer. boy that is so dumb. These are the actual people who make some money year in year out in the universe of speculators. a 7% stop is great if you can shoot for 30-50% per trade. This forum is too (dumb) daytrader oriented.
The 7% (actuallly 8-10%) is the initial stop loss, not a trailing stop. Stops can be quite wide once the trade shows a profit. Nor is CANSLIM necessarily about investing. Trades are held until they go bad. This can take hours or it can take months.
What I meant is that O'Neil's strategy is generally not meant for short term holding periods (days or less) which I think is what a lot of people think of when they hear the term "trading". I could be wrong. Obviously an open position is a trade regardless of how long you hold it.
A woman asked William O'Neill about short term trading in an interview on CNBC one time. He frowned ; & then gave a military or partly hedged answer, [also]said he used weekly charts. Picked up another book of his some time ago that's ''called the handbook for Cramer Berkowitz'',on cover.
I think this is the myth. In the world there are more "at home" speculators who buy and sell (with risk management etc) for longer term than daytraders. daytraders was a fad mimicking the institutions and the chicago floor where scalping was at one time profitable for some. O'Neil is a trader and I would even call Warren Buffett and the few million of his disciples traders except they only sell when they must. If you sell when a position is doomed you are a trader. You are an investor if you act like the sheep and buy and hold (and pray)
Here's a few that cost me thousands: 1. Waiting for a stock that had just broken out of a base that day to come down 15 cents so I could save 90 bucks. It never did, so I let it go and of course it took off. I kept tabs on it and traced the point were it started to give sell signals, 24 dollars higher than when I quibbled over 15 cents. Moral: you're playing for gains of 25% or more - don't nickel and dime yourself over a few bucks. 2. Selling a stock the first time it made a new high on low volume. This IS a sell rule, but it is tough to judge and must be put into context - was the market low volume that day? How far along is the stock from its breakout? Is the market strong or shaky? Is the stock starting to sell off hard? I netted 30% on the sale, nothing to complain about, but the REAL sell point would have netted me 160%. 3. Buying ANY breakout of a strong fundamental stock. You really have to analyze the price/volume action in the stock's base to judge its liklihood of success. O'Neil goes over this in his latest book "The Successful Investor", but it takes practice to learn. I bought several breakouts from bases that were poor, and they quickly turned into losers even though their fundamentals were great. 4. Waiting too long to sell. While I never violated any stops, a few times I could have gotten out earlier when new buys weren't working rather than waiting for them to fall 8%. 5. Buying on a return to the pivot point. A stock I loved gapped up past the pivot on the after hours session following its earnings announcement. I never fool with after hours trading, so I was just disappointed. About 2/3 days later the stock sold off so I thought I was the luckiest man on the planet to get it right at the original pivot point. Needless to say it kept falling and stopped me out with an 8% loss. While I imagine you could buy a stock if it just drifts down to its pivot in light volume if the market happened to be selling off a little, I prefer to avoid it if I miss the stock heading up. 6. Holding on to a breakout even though the breakout day's volume didn't end up 50% above average. While sometimes the breakout still holds up, the odds are better if the volume is very high. I was lucky to do most of my learning in a bull market last year. Unfortunately I wasn't applying the strategy until mid April and missed the start of the rally in March. I might have managed a decent profit even with my bonehead moves. Hope this helps.
sucre - These are the kinds of problems that plague every system. They are always identifiable and obvious in hindsight but some of them create an impossible scenario where you have to always second guess or use some subjectivity. The only thing that conquers this is experience but then market conditions are always changing so last years experience does you know good today. The conclusion and the answer is to create something that makes sense to you rather then someone else.
A quantitative and objective study of CANSLIM is here. http://www.elitetrader.com/vb/showthread.php?s=&threadid=35216