Stock traders across the globe look for new trading strategies to profit from market. Trading strategies largely differ according to traders' profit goals, type of trading, risk-tolerance, account size and personal preferences. CANSLIM is one of these trading strategies, which is considered as highly successful for most traders. CANSLIM is most beneficial for long-term traders and investors.
CANSLIM is actually a stock screening strategy, developed William O'Neil. It is a growth stock investing strategy (strategy of investing in stocks of growing companies) which combines both fundamental analysis and technical analysis to screen stocks. CANSLIM trading system aims at buying good growth stocks before a major price rise.
CANSLIM is an acronym of various indicators / features to be considered when screening a stock for trading.
'C' Represents Current Earnings: For any stock to be qualified as a CANSLIM stock, it should have great increase in current earning per share; more than 18%.
'A' Represents Annual Earnings: CANSLIM stocks should have high increase in annual earning per share; more than 25% for; more than 25% for last three years.
'N' Represents New: There should be something new related to the stock. CANSLIM traders look for companies which are under new management, or introduced new product, or undertaken new project or of which stock have touched a new high.
'S' Represents Supply / Demand or Shares Outstanding: Good CANSLIM companies should have less shares outstanding; less than 25 million shares is good, less than 5 million is better. The less the number of outstanding shares the greater the chance of upward price movement for every good news.
'L' Represents Leader: Trading stocks of leading companies (leaders of an industry or market) is better than trading stocks of followers; and every market should have at least one leader.
'I' represents Institutional Sponsorship: There should be more than 3 institutional traders or mutual funds interested in stock you are choosing. The greater the number of institutional sponsors, the larger their size are and the better their past performances, the better the stock.
'M' represents the market: Market timing is very important. Traders should use various technical analysis tools to predict and confirm trends, retracements and corrections. Buy when all major markets are going up.
CANSLIM stock trading system has proved more effective than most other long-term trading strategies. It considers various aspects of company, market and economy to make most accurate trading decisions at right time. But success of CANSLIM trading strategy require vastly on traders knowledge, his access to market data and strict following of rules.