I agree that there are a handful of extremely talented traders who employ Canslim that would probably be successful regardless of their method..Canslim happens to fit their belief system.. What Canlim does is provide a foundation and systematic approach to trading. The fundamental metrics are debatable,and are simple to backtest with Portfolio 123.. The technical aspect is obviously based on Momo,relative strength and market timing.No small task.. Imho,the most important aspect of Oneils system is the money management and position sizing methodology..I'm not saying his method is correct,but without a rigorous approach, I think one is doomed to fail... Oneils methodology is a framework to operate within..it's not the grail,but it's a dam good place to start
1. If involved in stocks, can't ignore that book. There is much that is common sense, it can help to frame how to think of investments. 2. Much of the market follows or claims to follow such things. One must know thine enemy. 3. Do you know how much money WON has and how it breaks down investments vs income? 4. He bought a seat on an exchange eons ago. 5. Fund and rules for funds likely do limit performance compared to a capable small trader at home. 6. One can follow all the rules of WON and still lose money. Not a guarantee. 7. Book has some very beginner level risk management concepts. How else are you going to put in your 10,000 hours?
O'Neill has been improved upon by Mark Minervini's How to Trade like a Stock Market Wizard which provides an extensive and logical explanation of CanSlim applied to battlefield conditions. He's a boastful guy and not to everyone's taste but he's a genius and a terrfic writer. Even if you end up following another strategy, Minervini explores market details in ways you won't find in many books. Running a successful mutual fund is a different business and the great momentum players are gunslingers dedicated to process and risk control. I've never spent time with this book without major lights coming on. Admittedly, I subscribe to Marketsmith and I'm giving myself two years to become conversant with Minervini's approach.
This is a familiar caveat. I don't dispute it but it does make you wonder why investment books don't lead with money mgmt and position sizing. Not very sexy I suppose, doesn't sell books and probably not that meaningful until you land in a world of shit. Minervini says he could handoff his trades and people would still lose money. My take: it takes two years to become conversant with his approach and maybe up to six years to make real money. Not quite brain surgery but a major commitment and undertaking. I've followed his pronouncements for two years and the only person I've found as thoroughly insightful is Jeffrey Gundlach, who operates in a much different space.
What I find lacking in most investment book is how and when to exit a trade. Even Minervini's books don't spend a lot of time and space on exit strategies.
It's been years since I've studied CANSLIM, but from what I remember it was relatively simple. It's not 100% mechanical--there's a bit of personalizing and subjectivity involved. But one could read the book (or even a good summary) and start applying it almost immediately. Sounds like Minervini's method is a lot more complex and subjective. Do you just buy and hold with all your accounts until you reach the "Eureka!" moment 2 to 6 years later?
He explicitly documents sell points in his second book Think and Trade like a Champion. Could be a couple days worst case or as long as the cash register is still ringing in a favorable market. O'Neill, always a shadowy presence, recommended letting a clear winner run 8-10 weeks after a promising breakout. Instructive, but Mark isn't that trusting. Love his titles! It's rumored that new editions will provide a cutout where you can measure the size of your dick.
Just to follow, what would you consider more advanced risk management concepts? It's interesting that Marketsmith with its 188 selectable variables has nothing other than beta to identify risk for a stock. Risk must be inferred from divergence among the fundamentals or visually from their charts. Not very promising for an automated strategy.
Yeah, I haven't gotten around to Minervini's books yet, even though I have them, too busy focusing on O'Neils book. I respect Minervini a lot, he's definitely legit and explains his thinking well. I've been placing some low size practice trades here and there with real $ using the CANSLIM method, and just from a beginner of the approach I can see how the setups are really low risk, high reward if you can time them correctly and enter at the right levels, which takes a ton of repetition and experience. This market is still choppy at best, but in a bull market, these breakouts will have greater staying power, especially on the back of good fundamentals. This is the approach I'm honing in on till I become profitable. For me personally, the general gist of the methodology just makes total sense, and letting trades ride for days, weeks, months, just fits my personality better I think. As far as O'Neils fund, I wasn't taking into account in this post the limitations you have when using this approach in a fund. You can't just go to cash when you want to like a retail trader can, you may have to order split because of the large account size, which can screw the whole position up, etc. Plus, most of the CANSLIM stocks are small to mid-caps which have less volume and liquidity again making it harder for a big fund to trade them. CANSLIM gives a true edge to the individual trader in the sense that an individual trader will not really have these constraints and the methodology is predicated on riding a trend and a trend with institutional backing.