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INM Dec '06 - Sticking to the System Isn't Always Easy, But You Must
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


Successful investors train themselves to have good reflexes and buy or sell stocks without letting emotions cloud their judgment.  Those of you who have read this column regularly have probably picked up on my repeated advice that you should trade based upon what you see happening and not trade based upon what you think might happen.  The investment system we use, CAN SLIM®, is a fact-based system.  The rules we follow are based upon extensive studies of what worked in the market and what did not work.  The system’s guidelines are based upon the characteristics of stock market’s most successful examples, not based upon opinions.

 

A stocks price and volume action is what matters most.  What we think is going to happen to a stock's price does not matter.  But it is not safe to assume that the way we think, or what we think, is unimportant. You have to keep confidence in what you are doing. That can be difficult when you suffer a few losses. You might start feeling like you are falling behind, missing out, or heading in the wrong direction.  A positive mental attitude is always very important.  You’ve got to have the conviction to endure many tests of your will when you are investing in stocks.  And for various reasons, there are a lot of people who buy into the CAN SLIM® methodology but then get lost along the way.

 

How long are you willing to persist in your pursuit of the goal of above average returns?  You could very easily evaluate your performance after 6 months, a year, or maybe two years, and with the benefit of hindsight see many ways in which things could have gone better.  Should that make you lose faith?  It shouldn't!  The big winning stocks normally make their greatest gains in a matter of 6-18 months, and once you finally latch onto a great one you can quickly make up for lost time.  I've seen investors double, triple, and quadruple their accounts sometimes in a period of much less than a year.  That kind of explosive growth is possible when you stick it, and it can make up for many years of sub-par returns.

 

Even when you do a good job of sticking with the program, you're likely to struggle at times. One way to keep you confidence up and to protect your positive mental attitude is to stay disciplined and follow the rules for successful investing which the book "How to Make Money in Stocks" spells out.  Many people who I have seen get discouraged with their results and then give up on the system, did not even follow its rules. Rather than taking responsibility for the results and tightening up their technique with respect to the following the guidelines, they brush over the fact they bought extended stocks, held losers way past the 7-8% max loss level for more painful losses, or bought companies with unimpressive earnings records.  It is silly how investors can gloss over their rule-breaking behavior and then blame the system for their failures.  This is like putting diesel fuel in a gasoline engine and then blaming the car manufacturer for making a car that doesn't run right. 

 

It seems to be a part of human nature to shift blame away from one's self and try to put the blame elsewhere.  At the same time, I am not saying that every time you suffer a loss in the market you broke the rules and were reckless.  Many times, things simply do not go as expected.  The market is filled with uncertainties.  That why limiting losses is an important skill you must master at the earliest.  It is a skill you are better off mastering while your account is small, because if you don't know to limit losses with a small account, you could be even more dangerous with a large account.  I've met people who have flushed millions of dollars away because they didn't limit their losses properly.

 

In the year ahead, I hope that you will remain confident and committed to being a successful investor who earns above average returns from your stock portfolio.  Thankfully, you are on the right course if you stick with the CAN SLIM® investment system.  It is something that can empower you to really produce life-changing wealth, and your odds are best if you stay disciplined and you stick to it long enough.  

About 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.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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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.

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