An Old Trading Method Can Still Deliver Gains
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 | | An Old Trading Method Can Still Deliver Gains | | | Many experienced traders might be familiar with Investor's Business Daily, the newspaper founded by William J. O'Neil. Many will also know that a subscription to the newspaper often includes a copy of his book, How to Make Money in Stocks.
The daily stock tables printed in Investor's Business Daily made it easy to find companies with strong earnings growth and high relative strength, the basic building blocks of a trading methodology O'Neil called CAN SLIM, which was an acronym for finding market beating stocks:
• Current earnings per share and sales should be up at least 25% and increasing at an accelerating pace.
• Annual earnings should also show an increase of 25% or more in each of the last three years.
• New highs in price or new products often stimulate further gains in stock prices.
• Supply of stock needs to be lower than demand, indicated by increasing trading volume in the stock.
• Leaders in relative strength offer the greatest potential gains in the short term.
• Institutional ownership is another indicator of demand, and increases in this measure are associated with rising prices.
• Market indexes like the Dow Jones Industrial Average or NASDAQ Composite should be moving higher, since the majority of stocks follow the market's lead.
| We found a stock that has a new product and discuss the N of that stock in our latest article, and we also share a trading strategy for that stock.
As we explain in detail, we use an options strategy that is focused on risk and the risks of the trade are strictly limited at the time the position is opened. We show what the amount of risk is in dollar terms and we also detail the potential gains of the trade which is 63%, based on actual recent market data.
You can continue reading about this in our latest free educational article that is available right here.
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