CANSLIM & Momentum Investing 02 (Aug 09 - Dec 24)

[winston]

Looks like this guy dont have a Stop Loss of 7%-8% as recommended by CANSLIM ..


IBD And Market Timing? I Don’t Think So By Joseph Meth

I was an avid subscriber to Investors Business Daily for many years and envied to returns they were able to generate through their top 100 stocks. They said that if I followed their CANSLIM methodology I too could generate comparable returns for my portfolio. But it wasn’t as easy as they claimed. My portfolio just wasn’t matching theirs.

But then the Financial Crises Crash hit towards the end of 2007 and the market imploded with a 57% decline. Fortunately for me, in my attempts to emulate their approach I realized that it was probably more important to time the market well that it was to pick stocks well.

The amount of money that you lose during major down turns can almost totally wipe out any profits you made in the bull market leading up to the Bear Market. That’s especially true during the secular bear market we’ve unfortunately had to endure for the past 12 years.

IBD may be excellent at identifying stocks leading the market but they do so in a vacuum without any apparent concern for market timing, without giving any recognition to the fact that there are times when it doesn’t matter how good your stocks are they’re not going to be good enough, that upside momentum can lead to out-sized gains but downside momentum can also lead to out-sided losses:

While the Financial Crisis Crash S&P 500 collapsed the market by about 57%, the IBD 100 stocks were decimated by around 85%! Sure, they’re coming back but how good would their performance had looked had their approach be able to anticipate the coming crash and signaled that an exit was crucial. [No broker, advisory or newsletter service will suggest that probably because of the fear of losing subscription or fee revenue.]

At the end of 2007, I developed a market timing indicator that signaled a major decline was probably immanent. I have since translated the indicator into a simple “Market Security Meter” similar to the Homeland Security’s Terror Alert system:

O.K., so it’s not that original but it works. And what does the MSM indicate now? Yesterday it was indicating Pause (a caution light). But I know for a fact that as of today, if the market closes ends about where it is now (1182.11 at 12:40) the signal will change color and flash a different signal.

Having a successful process for picking good stocks gives you a terrific advantage but avoiding the kind of damage as suffered by the IBD 100 list during the Financial Crisis Crash gives you a true edge for getting far ahead over the long run.

http://www.dailymarkets.com/stock/2010/ ... -think-so/

[millionairemind]

Er.... in defense of CANSLIM, the author probably only used CANSLI and not the M.

When market is in correction, you never hold stocks on the LONG side..

If you follow the M strictly, you would have come out ahead in 2008.

[winston]

"Trends, like horses, are easier to ride in the direction they are going."

John Naisbitt

[kennynah]

Er.... in defense of CANSLIM, the author probably only used CANSLI and not the M.

When market is in correction, you never hold stocks on the LONG side..

If you follow the M strictly, you would have come out ahead in 2008.

try as hard as i did.. i just couldn't bring myself to agree with canslim approach...

but this only serves to prove that MM and I are friends... we can truly agree to disagree with absolutely no hard feelings whatsoever...

[Aspellian]

I fully agree with this... except when the horses are jumping off the cliffs!

[Aspellian]

I have not experience the "fullness" of CANSLIM as last one year is more of a trading market and i was too eager initially and traded on areas beyond my abilities. But I believe that the M of CANSLIM will be evident when market tanked big time and rebounded off the bottom.

I did some back testing, if there's great volatilities in the market, CANSLIM can yield a rather decent returns...if one stick to the rules and be patient.

So can I also be friends with you through agreeing to disagree with you, Kenny da-ge??!! haha!!

[winston]

try as hard as i did.. i just couldn't bring myself to agree with canslim approach...

Just curious. Which part of CANSLIM do you not agree with ?

[kennynah]

can't say exactly....

it's just too complex for me.... hahaha...

but if i had to pin point...i'd say, the breakout principal...to me, it's too late for swing trades...bcos, usually, by the time price goes above the "handle", it would have been quite far away from the low point... the degree of subjective interpretation is as wide as elliot wave.... just like the volume count, also too subjective...

perhaps canslim approach is suitable for a prolonged uptrend.... but to me, i find it quite useless during a recession

and this approach does not offer users indictations to go Short...

[millionairemind]

but this only serves to prove that MM and I are friends... we can truly agree to disagree with absolutely no hard feelings whatsoever...

haha towkay.... just like we can openly discuss about differences in religious views on our first meeting, its this open mind that makes us more accepting about other people's views.

[kennynah]

..So can I also be friends with you through agreeing to disagree with you, Kenny da-ge??!! haha!!

but of cos bro asp

we are so unqiue individuals and yet diverse.... we have to be receptive of opposing views so as not to be too myopic ....