Are you making money in the market? If yes, have you been so on a consistant basis? The book you are referring to is actually a really good book. It’s not just his methodology, but a methodology used by many successful investors before him. I’ve been trading on wall st for over 1o years. Eric, and I mean this in the nicest way, I don’t think you have a clue what you’re talking about. Please do some research on a topic before making an opinion. Best of luck with your trading.

A stock comes on my radar from a variety of sources: CNBC, Fox, Barron’s, M*, IBD, WSJ, whatever.

1. I check it with M* to see how it’s rated, whether it’s rated, and its financials.
2. I check it’s story, history with wsj.com.
3. I do a stock checkup on investors.com.
4. I do a options check on investors.com and on my broker’s systems.
5. I check charts on stockcharts.com, where I look at RS, MACD and PnF charts as well as daily, weekly and monthly charts. Then I decide.

IBD influences, but doesn’t dictate how I trade, but I do try to cut my losses at 7% or 8%, which works for me.

It works great when small-cap growth stocks are the asset class of choice. It works horribly when nearly any other asset class is in favor.

From about ‘95 – ‘98, I devoted a quarter of my trading account to CANSLIM. I indexed the rest.

Let me say first, it was a very labor-intensive method of stock selection. To do the necessary homework, I found myself devoting 20 – 35 hours per week because, at the time, there were no online tools.

I got about 55% winners, 45% losers and very little rest.

First, it appears to me there is a cottage industry in fading those very breakouts which IBD urges you to buy.

Second, it’s very time and attention-intensive. The stocks it wants you in are incredibly volatile. You may have a perfect plan, but if you aren’t near a computer at that exact pivot point, the stock is gone.

Third, you get stopped out of a lot of trades. More times than I care to remember, I’d go long something, set my stop-loss only to have it hit within the hour.

Fourth, generally speaking, I’ve found that a pure chartist approach is often a panacea for people who are too lazy to do the homework. Charts can be valuable tools, but also, they can work just often enough to be self-reinforcing.

Indexing performed far better during the period I tested.

I would also point to the failure of the CANSLIM mutual fund.

Bottom line, I’d read the paper, but I’d never trade a live account with these methods again. They’re a waste of time and effort for the retail investor.

It does not work for me. I like to buy things near their lows, and when relative strength is pretty poor, but where valuation puts the net fairly close below the current price. I also like buying strong companies in out-of-favor industries.

Keep up the good work. Value investing is very rewarding

David

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