Go to Jeff Salisbury LWGate Home Page.From: "Jeff Henderson" <JHend746@cox.net>
Subject: RE: [CANSLIM] negatives of CANSLIM
Date: Wed, 20 Aug 2003 06:07:05 -0500
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Jeff,
Great point, thanks! What about exiting, do you think a percentage exit
is ok to use? I was thinking more about moving exits that deal with
volatility perhaps some multiple of the ATR.
- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of Jeff Mulder
Sent: Tuesday, August 19, 2003 10:35 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] negatives of CANSLIM
<< Also, as far as using WON's entry signals, specifically the chart
patterns, I will quote Tharp from his book, Trade your way to Financial
Freedom re:Chart patterns in general "However, such patterns are very
difficult to computerize and thus test. In addition when people do test
these various patterns, they do not find anyevidence that they increase
the reliability of entry signals beyond the 50 percent level." I do not
doubt WON's methods, but I believe that skepticism is healthy and that
is beneficial to discuss potential flaws in a system. >>
Your paragraph above uses a quote from Van Tharp's book to suggest that
a reliability rate of 50% is a potential flaw in the CANSLIM system.
Please remember, however, the primary theme of the Tharp book:
Expectancy and frequency are the keys to system profitability, not entry
reliability.
Research into the expectancy of CANSLIM systems will reveal much more
about potential flaws than analysis of entry reliability. Drawdowns are
another potential flaw. You may want to investigate the size and
duration of drawdowns within CANSLIM systems as well.
A couple weeks ago, Katherine Malm published links to the AAII's annual
summaries of performance for several dozen stock screens. The CANSLIM
screen is the second most profitable screen tracked by AAII.
Interestingly, the screen removes the technical entry (CWH breakout)
many CANSLIMmers consider crucial to their systems. Instead, the
portfolio simply rebalances on a monthly basis across however many
stocks meet the screen's requirements. Despite being fully invested at
all times, and despite buying stocks extended well beyond their pivot
points, the screen has delivered positive returns in all of the last
five years.
If you research historical holdings within the AAII CANSLIM portfolio,
you'll see that their entry reliability is below 50%. Even with that
potential flaw, the screen has a 5-year cumulative return of 350%
through 2002.
- - Jeff
- ----- Original Message -----
From: Jeff Henderson <mailto:JHend746@cox.net>
To: Canslim <mailto:canslim@lists.xmission.com>
Sent: Sunday, August 17, 2003 5:17 PM
Subject: [CANSLIM] negatives of CANSLIM
Hi group,
I'm glad that we can discuss companies using CANSLIM to evaluate
companies, but I was wondering if any of you think there are any
negatives to this system (as discussed in HTMMIS). I think it's
important to fully evaluate a system, look for any absolutes or
conditionals in the system and evaluate it against other options. For
example I know CANSLIM works the best during a bull market and we are
not in a full fledged bull market right now. Also, as far as using
WON's entry signals, specifically the chart patterns, I will quote Tharp
from his book, Trade your way to Financial Freedom re:Chart patterns in
general "However, such patterns are very difficult to computerize and
thus test. In addition when people do test these various patterns, they
do not find anyevidence that they increase the reliability of entry
signals beyond the 50 percent level." I do not doubt WON's methods, but
I believe that skepticism is healthy and that is beneficial to discuss
potential flaws in a system.
Jeff
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<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'>Jeff,<o:p></o:p></span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'><o:p> </o:p></span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'>Great point, thanks!<span
style=3D'mso-spacerun:yes'> </span>What about exiting, do you =
think a percentage
exit is ok to use? <span style=3D'mso-spacerun:yes'> </span>I was =
thinking more
about moving exits that deal with volatility perhaps some multiple of =
the ATR.<o:p></o:p></span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'><o:p> </o:p></span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'>-----Original =
Message-----<br>
<b><span style=3D'font-weight:bold'>From:</span></b>
owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com] <b><span
style=3D'font-weight:bold'>On Behalf Of </span></b>Jeff Mulder<br>
<b><span style=3D'font-weight:bold'>Sent:</span></b> Tuesday, August 19, =
2003
10:35 PM<br>
<b><span style=3D'font-weight:bold'>To:</span></b> =
canslim@lists.xmission.com<br>
<b><span style=3D'font-weight:bold'>Subject:</span></b> Re: [CANSLIM] =
negatives
of CANSLIM</span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'><o:p> </o:p></span></font></p>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'><< Also, as far as =
using
WON’s entry signals, specifically the chart patterns, I will quote =
Tharp
from his book, <u>Trade your way to Financial Freedom</u> re:Chart =
patterns in
general “However, such patterns are very difficult to computerize =
and
thus test.<span style=3D'mso-spacerun:yes'> </span>In addition =
when people do
test these various patterns, they do not find anyevidence that they =
increase
the reliability of entry signals beyond the 50 percent =
level.”<span
style=3D'mso-spacerun:yes'> </span>I do not doubt WON’s =
methods, but I
believe that skepticism is healthy and that is beneficial to discuss =
potential
flaws in a system. >></span></font><o:p></o:p></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Your paragraph above uses a =
quote
from Van Tharp's book to suggest that a reliability rate of 50% is a =
potential
flaw in the CANSLIM system. Please remember, however, the primary =
theme
of the Tharp book: Expectancy and frequency are the keys to system
profitability, not entry reliability.</span></font><o:p></o:p></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Research into the =
expectancy of
CANSLIM systems will reveal much more about potential flaws than =
analysis of
entry reliability. Drawdowns are another potential flaw. You =
may
want to investigate the size and duration of drawdowns within CANSLIM =
systems
as well.</span></font><o:p></o:p></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>A couple weeks ago, =
Katherine Malm
published links to the AAII's annual summaries of performance for =
several dozen
stock screens. The CANSLIM screen is the second most profitable =
screen
tracked by AAII. Interestingly, the screen removes the technical =
entry
(CWH breakout) many CANSLIMmers consider crucial to their systems.
Instead, the portfolio simply rebalances on a monthly basis across =
however many
stocks meet the screen's requirements. Despite being fully =
invested at
all times, and despite buying stocks extended well beyond their pivot =
points,
the screen has delivered positive returns in all of the last five =
years. </span></font><o:p></o:p></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>If you research historical =
holdings
within the AAII CANSLIM portfolio, you'll see that their entry =
reliability is
below 50%. Even with that potential flaw, the screen has a 5-year
cumulative return of 350% through 2002.</span></font><o:p></o:p></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>- =
Jeff</span></font><o:p></o:p></p>
</div>
<blockquote style=3D'border:none;border-left:solid black =
1.5pt;padding:0in 0in 0in 4.0pt;
margin-left:3.75pt;margin-top:5.0pt;margin-right:0in;margin-bottom:5.0pt'=
>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>----- Original Message =
- ----- <o:p></o:p></span></font></p>
</div>
<div style=3D'font-color:black'>
<p class=3DMsoNormal =
style=3D'margin-left:.5in;background:#E4E4E4'><b><font size=3D2
face=3DArial><span =
style=3D'font-size:10.0pt;font-family:Arial;font-weight:bold'>From:</span=
></font></b><font
size=3D2 face=3DArial><span =
style=3D'font-size:10.0pt;font-family:Arial'> <a
href=3D"mailto:JHend746@cox.net" title=3D"JHend746@cox.net">Jeff =
Henderson</a> <o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><b><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial;font-weight:bold'>To:</span><=
/font></b><font
size=3D2 face=3DArial><span =
style=3D'font-size:10.0pt;font-family:Arial'> <a
href=3D"mailto:canslim@lists.xmission.com" =
title=3D"canslim@lists.xmission.com">Canslim</a>
<o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><b><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial;font-weight:bold'>Sent:</span=
></font></b><font
size=3D2 face=3DArial><span =
style=3D'font-size:10.0pt;font-family:Arial'> Sunday,
August 17, 2003 5:17 PM<o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><b><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial;font-weight:bold'>Subject:</s=
pan></font></b><font
size=3D2 face=3DArial><span =
style=3D'font-size:10.0pt;font-family:Arial'> [CANSLIM]
negatives of CANSLIM<o:p></o:p></span></font></p>
</div>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'><o:p> </o:p></span></font></p>
</div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Hi =
group,<o:p></o:p></span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'><o:p> </o:p></span></fo=
nt></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>I’m glad that we can =
discuss
companies using CANSLIM to evaluate companies, but I was wondering if =
any of
you think there are any negatives to this system (as discussed in =
HTMMIS).<span
style=3D'mso-spacerun:yes'> </span>I think it’s important to =
fully
evaluate a system, look for any absolutes or conditionals in the system =
and
evaluate it against other options.<span =
style=3D'mso-spacerun:yes'> </span>For
example I know CANSLIM works the best during a bull market and we are =
not in a
full fledged bull market right now.<span =
style=3D'mso-spacerun:yes'>
</span>Also, as far as using WON’s entry signals, specifically the =
chart
patterns, I will quote Tharp from his book, <u>Trade your way to =
Financial
Freedom</u> re:Chart patterns in general “However, such patterns =
are very
difficult to computerize and thus test.<span =
style=3D'mso-spacerun:yes'>
</span>In addition when people do test these various patterns, they do =
not find
anyevidence that they increase the reliability of entry signals beyond =
the 50
percent level.”<span style=3D'mso-spacerun:yes'> </span>I do =
not doubt
WON’s methods, but I believe that skepticism is healthy and that =
is
beneficial to discuss potential flaws in a =
system.<o:p></o:p></span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'><o:p> </o:p></span></fo=
nt></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Jeff<o:p></o:p></span></font=
></p>
</blockquote>
</div>
</body>
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