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INM Apr '06 - These Pointers Should Not Be New Concepts To You
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
Having dealt very closely with hundreds of individual investors through my almost 18 years as a licensed representative, it seems that one of the most common problems I have seen is a lack of patience. Too many investors are over-anxious to generate trades and activity. Many are prone to buying anything high-ranked on any given day, which simply isn’t showing enough discipline or selectivity. What is rare among investors is the patience to sit back and watch for an almost perfect situation. Personally, I would rather wait many weeks, or even months, for a truly exceptional buy candidate to show up. Too many investors are the unsuccessful folks, the ones I see settling for mediocre examples that either fall short, or barely meet certain minimum thresholds.
Not much has changed since it was pointed out in “How to Make Money in Stocks” that the two most common mistakes investors make are holding their losing positions too long, and selling their winners too early. Very few investors are capable of learning from the experience of others as described in books, courses, or in educational newsletters like this one. It seems as if everyone has to learn certain painful investing lessons on their own. It is sad but true, that the most common mistakes I hear about investors making today are the same two mistakes to which the book called attention long ago.
I am tired of seeing investors face the same repeated disappointments I have seen. I would like to make a positive contribution and a meaningful difference in the lives of investors. To do so, I will cover some key pointers for you quickly in this column. These should not be new concepts to you!
Weak stocks tend to stay weak, and strong stocks tend to stay strong. So, if the normal human instinct leads you to go bargain hunting for cheap stocks, you are probably on course for a big mistake.
There is almost always a direct correlation between a company’s earnings performance and its share price’s performance. To have the best chances at landing a big gain in a stock, the company you buy should be producing earnings results that are very impressive. Even if the company's new technology sounds exciting, do not expect a big run-up in the share price of a company that only has demonstrated mediocre earnings growth.
If you discover a hot stock that has been running up, maybe you’ll be tempted like a lot of other latecomers to buy into it at the wrong time. Do not buy a stock unless you are familiar with the proper guidelines for buying stocks. Then, only move forward with your purchase when you are sure you are buying after a proper base has been built, and when volume rises dramatically as the stock rises above the pivot point.
When investing, there are many possible scenarios to plan for, so let’s talk quickly about the worst case scenario - a devastating loss! The best way to handle losses is to not leave them open to become more devastating. Holding losing positions past the 7-8% loss guideline is dangerous business
Even when you are correctly following all of the buying and selling rules as outlined in the book, you might be lucky to come away a winner any more than half of the times you buy stocks. The market is tricky to deal with, and rarely does a huge profit come to investors very easily. It can take years of patience and determination with the CAN SLIM(TM) method to finally start seeing your successes adding up meaningfully in your account. What makes you truly an expert is removing the emotion and trading based on what you actually see happening, not trading based on what you’d like to see, or trading based on what you think you might see. If you are investing in a cooperative market environment you should almost always be able to limit losses at -7%, and be able to nail down your fair share of +20% gainers. No matter what, you should not have to endure catastrophic and devastating losses. Those should be rare!
Sometimes, having an extra set of eyes and ears can be a big help. If you are still struggling to invest successfully on your own, consider calling my office and getting some direct input on your situation. While I can't work miracles, I may be able to help determine a course of action that suits you best and helps you reach your goals.
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.