CANSLIM Stock Investing Trading System
- Consider buying stocks with each of last three yearsí earnings up 25%
or more, return on equity of 17%+ and recent earnings and sales
- Recent quarterly earnings and sales should be up 25% or more.
- Avoid cheap stocks. Buy higher quality stocks selling $15 a share and
- Learn how to use charts to spot sound buy points. Confine your buys to
these points as stocks breakout on big volume increases.
- Cut every loss when itís 8% below your cost. Make no exceptions so you
can always avoid huge, damaging losses. Never average down in price.
- Have selling rules on when to sell and take a profit on the way up.
Review "When to Sell and Take a Profit" in How to Make Money in Stocks.
- Buy when market indexes are in an uptrend. Reduce investments and raise
cash when general market indexes show five or more days of volume
- Read IBDís "Investorís Corner" and "The Big Picture" columns to learn
how to recognize important tops and bottoms in the market indexes.
- Buy stocks with a Relative Price Strength Rating of 85 or higher in the
IBD SmartSelect® Corporate Ratings.
- Pick companies with management ownership of stock.
- Buy mostly in the top six broad industry sectors in IBDís New High
- Select stocks with increasing institutional sponsorship in recent
- Current quarterly after-tax profit margins should be improving and
near their peak margins.
- Donít buy because of dividends or P-E ratios. Buy the #1 company in an
industry in earnings and sales growth, R.O.E., profit margins and
- Pick companies with a new product or service.
- Invest mainly in entrepreneurial New America companies. Pay close
attention to those with an IPO in the past 8 years.
- Check into companies buying back 5% to 10% of their stock and those
with new management (what is managementís background?).
- Donít try to bottom guess or buy on the way down. Never argue with the
market. Forget your pride and ego.
- Find out if the market is currently favoring big cap or small cap
- Do a post-analysis of all your buys and sells. Post on charts where
you bought and sold each stock. Evaluate and develop rules to correct
your major past mistakes.
- All prior 20 rules have to be followed carefully, not just the ones
Investors Business Daily
Under the millstones of the banks
Hoping for the trend and finding chaos
Above average? You will still lose!
The negative-sum game for investors