Hans Lecture Notes - CAN SLIM Presentation Feb. 6, 2013

Hans’ Lecture notes - CAN SLIM presentation Feb. 6, 2013

Topic:"Trading psychology of the CAN SLIM investor - opportunities and common pitfalls"

Situation: You sit in front of your Television, CNBC is on and the market is hitting fresh all-time highs. You are only 50% invested. What do you do?

Some possibilities:

1. Hoping for a pull back so that you can buy in cheaper

2. Put the remaining 50% to work

3. Wait and see

4. Realize the gains on your existing holdings

There is an alternate possibility just as valid as the other four but perhaps more powerful: follow your rules.

Who has written rules?

Greg, Ramtin

My background, various approaches, econ degree, unlearn stuff, mistakes with own money, introduction to CAN SLIM.

why CAN SLIM is so powerful, “holy grail”.

Full time, at least two hours/day

Psycological aspects when trading/investing:

Pitfalls:

Loss aversion

Past baggage from childhood, school, college. My dad, oven company.

Pattern recognition

Investing too late

Selling winners too soon

Holding on too long

Not having a Plan B, not having exit strategy.

Opportunities:

Need to know at all times what to do

Parallels in life, good/bad. Behavior in trading, where else does it show up.

Need to be organized at all times. For example email inbox, task lists, stop orders.

Need to be like an olympic athlete: disciplined, focused, serious about your endeavors in all respects.

Rules

Not important what exactly your rules say but that you apply them consistently. If you don’t apply them consistently, ask yourself why: do the rules not make sense or are you not disciplined enough to follow them? Have the rules prevented you from taking advantage of a substantial gain? If rules don’t make sense in the current environment, does it make sense to change them? If so, change them over a weekend, not as an immediate reaction to a loss.

Your rules

1. In order to break the rules, you first have to manage them 100%.

Purpose:

1. Minimize losses

2. Minimize your time involved in executing your trades and watching the market

3. Eliminate second guessing, always know what to do in any given situation

Trading rules need to be simple, easy to follow and omnipresent.

Check list for the CAN SLIM investor:

1. Do I enjoy investing via the CAN SLIM method? Does it suit my personality?

2. Am I consistently educating myself in the CAN SLIM principles?

3. Are there more effective investment systems/approaches to invest my funds, given my interests, time availability, overall assets, to invest my funds?

4. Read about other investment approaches, both for the stock market and other investment vehicles (say real estate).

5. Attend the CAN SLIM workshops on a regular basis.

6. Attend meetups, talk to other investors, CAN SLIM and otherwise.

7. Make sure your overall life is “in order”. Any unfinished business/conflict that needs attention? Are you spending enough time with spouse, kids, close friends? In the end, the most important thing is your relationships and time spent with your loved ones. Are you in balance: food in moderation and fresh, in tune with environment: office set up, taking walks, beeing at peace. All this contributes to trading success as you are more likely to follow rules when you are in balance from a biochemical point of view and psychological point of view. Do you follow too many activities, are you spread too thinly?

Too many things: clutter, too many relationships, too many memberships in various on and offline communities. Less information is more: price and volume conveys all the information you need to enter or exit a stock. Are you following the 80/20 rule in all aspects or your life?

8. Be in a constant “mood of wonder”, not just about trading but about all things around you. Ask questions, don’t make assumptions.

9. Throw your preconceived notions over board.

10. Don’t read any daily newspapers, financial or otherwise, don’t watch CNBC. Read books and The Economist.