Honest review of the CANSLIM strategy

Introduction to Can Slim Investing System

In this section, Matt Caruso introduces the Can Slim investing system and shares his experience with it.

What is Can Slim?

• Can Slim is an acronym created by William J O'Neill for discovering the highest potential growth stocks in the market.

• The system describes what type of stocks to look at and what are the fundamental criteria of these companies.

Matt's Experience with Can Slim

• Matt was introduced to active investing in the market through William O'Neill's book "How to Make Money in Stocks."

• He was hooked from that point on and all he ever wanted to do was trade for a living and be a trader.

• Initially, he experienced a lot of failure buying breakouts as described in the book.

Understanding Can Slim

In this section, Matt explains what Can Slim is beyond just an acronym.

Misconceptions about Can Slim

• The book "How to Make Money in Stocks" goes way beyond just Can Slim.

• There isn't any discussion about when to buy and sell these stocks.

Elements of Can Slim

• C stands for current quarterly earnings

• A stands for annual earnings and sales

• N stands for new products or new highs

• S stands for sales or supply-demand

• L stands for leadership relative strength

• I stands for institutional sponsorship

• M stands for Market Direction

Timing Stocks with Chart Patterns

In this section, Matt discusses how William O'Neill uses chart patterns to time stock purchases.

Chart Interpretation

• William O'Neill spent so much time discussing how to interpret charts when the right time to buy is.

Trend Following System

• Can Slim is a trend following system.

• You're looking for stocks that have all these great fundamental criteria and then you want to time them by the breakouts and hold them for extended periods of time until the technical or fundamental action says that it's not worth holding anymore.

High Failure Rates

In this section, Matt discusses the high failure rates associated with trend following or breakout strategies.

Characteristics of Trend Following System

• The typical characteristic of any type of trend following or breakout strategy is high failure rates.

• It's difficult to sell a stock after committing so much effort into understanding the company and why they're leaders in their industry.

Need to Cut Losses

• William O'Neill teaches the need to cut losses to limit your risk.

• This lesson is critical for limiting risk over time.

The Importance of Studying Past Winners

In this section, the speaker discusses the importance of studying past winners and how it can help investors understand what is possible in terms of returns.

Survivorship Bias

• Looking at past winners can create a survivorship bias.

• The book shows all the past winners, which can be misleading.

• It's important to focus on the current crop of companies that meet certain criteria.

Taking Profits Too Soon

• Many people take their gains too soon.

• This means they don't cover all their losses and miss out on potential life-changing opportunities.

• Not every stock will be a powerful winner, so it's important to know when to take profits.

The Nuances of Successful Investing

In this section, the speaker discusses how there are many nuances to successful investing that are not covered by CAN SLIM.

Deceptively Simple Book

• There is a lot of knowledge in the book despite its deceptively simple title and writing style.

• It takes experience to apply the lessons in real-time.

Identifying Substantial Winners

• Only one or two out of ten stocks will be substantial winners.

• It's important to identify these winners and take profits accordingly.

Portfolio Management and Risk Management

• The book doesn't discuss portfolio management or risk management at a portfolio level.

• Position sizing is critical for managing risk and maximizing gains.

Frustrations with CAN SLIM

In this section, the speaker talks about his frustrations with CAN SLIM as a young investor.

Difficulty in Difficult Markets

• Systems don't work optimally in difficult markets.

• It takes experience to understand when it's a bear market and to have the right tools to adapt.

• The book doesn't discuss portfolio management or risk management at a portfolio level.

Importance of Quality Companies

• Anyone can make money in a bull market, but few can keep those gains over the long term.

• The difference between success and failure is in finding quality companies and doing the work to prepare for them.

Personal Experience

• The speaker had frustrations with CAN SLIM as a young investor.

• It takes experience to apply the lessons in real-time.

The Frustration of Gap Down

In this section, the speaker talks about his experience with the Can Slim system and how he initially had a bias towards thinking that finding breakout stocks would lead to endless profits. However, he soon realized that it was important to cut losses and pay attention to the hard parts of the system.

Perception Bias

• The speaker had a bias towards thinking that finding breakout stocks would lead to endless profits.

• He realized that it was important to cut losses and pay attention to the hard parts of the system.

• The natural human instinct is to focus on the goods and ignore the bad.

Importance of Can Slim System

• The Can Slim system is still considered by the speaker as one of the best things ever written about Market wise in terms of finding incredible growth opportunities.

• All truly great companies that have phenomenal advances are found using fundamental analysis based on earnings, sales, and other factors provided by Can Slim.

Adjusting Approach

• Relying solely on breakout type strategies may be successful over time but can be difficult to live with due to a high degree of failure.

• The speaker has adjusted his approach by using his own technical knowledge learned as a day trader Market maker all while focusing on accumulation by institutions and detecting strength in short-term setups allowing him to build size into positions while controlling risk along the process.

Can Slim and How to Make Money in Stocks

In this section, the speaker shares their experience with Can Slim and how it can help make money in stocks.

Experience with Can Slim

• The speaker invites viewers to share their own experiences in the comments.

• Can Slim may not work for everyone based on individual risk profiles and win rates.

• It is important to implement a strategy that aligns with one's own thoughts and preferences.

• If a strategy does not work well with an individual's risk profile or win rates, they will not be able to apply it effectively.