How to Make Money in Stocks: A Winning System in Good Times or Bad

by William J. O'Neil

THE BUSINESSWEEK , USA TODAY , AND WALL STREET JOURNAL BUSINESS BESTSELLER! The bestselling guide to buying stocks, from the founder of Investor's Business Daily ­­now completely revised and updated When it was first published, How to Make Money in Stocks hit the investing world like a jolt, providing readers with the first in-depth explanation of William J. O'Neil's innovative CAN SLIM investing method. Five years later, O'Neil, founder for the industry icon Investor's Business Daily, revised his classic text and provided readers with a newer glimpse on how the average investor can make money in the equities market. This third edition of H ow to Make Money in Stocks has been revised and updated with new chapters designed to help investors increase their performance. New discussions

Genres: Finance, Business, Nonfiction, Money, Economics, Personal Finance, Self Help

288 pages, Paperback

First published January 1, 1988

About the author

William J. O'Neil is a stock trader, entrepreneur and writer, who founded the business newspaper Investor's Business Daily and the stock brokerage firm William O'Neil & Co. Inc. He is the creator of the CAN SLIM investment strategy.

He studied business at Southern Methodist University, received a Bachelor's degree and served in the United States Air Force.

Reviews

[Jim · Rating 1 out of 5]

Horrible book filled with useless garbage and nonsense. Basically, a get rich quick by using my subscribing to my website scam. Author's technical investing strategies are presented in a very non-rigorous and non-compelling manner. He uses examples but any idiot can cherry pick a few examples to prove a point. That does not make a convincing argument.

I could belabor my point with more examples but instead I recommend 2 much more insightful and informative books on investing: The Warren Buffet Way or The Little Book of Common Sense Investing.

[erjan avid reader · Rating 2 out of 5]

i swept through this book and got a detailed overview of it.

It is for long term investing - 6-18 months. The learning rate using canslim is very low, because you have to spend weeks, months before your forecast proves wrong or right!

Right now, this is not what i want, so i close this book, after reading most important parts: common mistakes and cup and handle pattern.

About 40% of this book is full of charts, and you will spend considerable amount of time reading them.

overall, the book advertises its own newsletter service, stating you should be independent but still listen to the guru.

As one reviewer on amazon stated:" you would have to put in lot of work & time to figure out if it works or not"

[Curtis · Rating 5 out of 5]

I've read a few investment books, and this is the most comprehensive system I've found for determining when EXACTLY to enter and exit positions. The consistent, unemotional method that O'Neil provides has helped me immensely in thinking about and executing my investing strategies.

[Matt · Rating 3 out of 5]

William O'Neil's book made me want to give up fantasy sports and take up investing. It seems like the time I spend reviewing an athlete's past performance and projecting future ones could be better spent on researching stocks, something that could actually make me money and possibly provide a similar stimulation.

How to Make Money in Stocks teaches readers how to identify good companies that are about to become great and then how to determine if and when to buy their stock. The mnemonic CAN SLIM describes how he identifies fundamentally sound companies. C=Current earnings, A=annual earnings, N=new product, S=Supply and demand, L=leader or laggard of their sector, I=Institutional sponsorship, M=how the stock is priced relative to market indices. The mnemonic seemed like a gimmick targeted at suckers who paid to learn about stocks in a Holiday Inn ball room, but the content of the mnemonic seemed sound.

The portion of the book I found most interesting was learning how to interpret stock charts. O'Neil recommends buying stocks after they have formed a good base price. The base refers to the shape a stock's historical price has made in recent weeks. There are a few shapes he recommends and at first these shapes seemed about as arbitrary as picking a loose grouping of stars and calling it a constellation, but after further research it seems like there is some truth to this advice. I can definitely look at the chart of a stock that went up and identify the base pattern signalling its rise. The real question is whether I can identify a base pattern without the benefit of hind sight. If so, goodbye fantasy sports. If not, fantasy sports, I'll never stray again.

[Yanjia Li · Rating 4 out of 5]

Overall a good introduction to O'Neil's trading system. The essence of this system is to combine value analysis together with supply demand analysis (using chart as a proxy). Then, after sufficient research, one should only hold a few winning stocks and keep an eye on the general market. This book shows a detailed system from micro perspective, but in reality, it could take a long time for the reader to actually excel at it I believe because there're so many ambiguity and edge-cases around so many rules. But I think there're few key ideas behind this system:

1. Treat trading like a business, so you'll want to cut the worst performing ones and hold the best ones
2. Pick stocks based on the growth of a company, such as earning growth, product growth etc
3. Understand that the key to win is to lose less than others, so you need to cut loss strictly at 8% (absolute loss), but allow the winner to grow at least 20%, which is 3:1 ratio.
4. And most importantly, respect and follow the market, do not fight against it.

I have to say O'Neil isn't a good writer. The book could be organized with better structure. Instead, O'Neil poured lots of random thoughts in each chapters which makes it not quite consistent. And he tried too hard to sell his IBD stuff. He could totally remove those IBD things from each chapter and have a new chapter to give hands-on instructions for those who are interested. I do like the Q&A section where he explained his thoughts about lots of common topics in investment, such as short selling, options writing etc.

-----------------

Some spoilers below:

The CANSLIM principles are:

C: Current quarterly earning growth should be high. You should only look at quarter to quarter increase to avoid seasonality. And the growth rate should be at least 20%. You could check consensus estimates to confirm your idea. But it's better to make sure the sales growth is at least 25% too. Similarly, if the earning growth slowed down significantly for two quarters, it's also a sign of weakness.

A: Annual earning should increase steadily for at least two years before the break out too. Also, pay attention to ROE and cashflow per share. The author believe everything in the market sells for about what it's worth at the time based on the law of supply and demand. So there's no such "cheap" stock to him.

N: New product, services or management from the company. Basically, there should be something new to drive the break out.

S: Supply and demand determines the price. It's a good sign for a small to mid size company to buy back stocks. And lower debt ratio is also good. One way to show the S&D is by checking the volume. If volume dry up when a stock pull back in price, it means there's no further selling pressure. And when price going up, you'll want to see volume up because it means some institutions start to buy too.

L: Leader is far better than lagger. Still, consistent with author's idea about chasing the best stocks, those lead their industries and are number one in their field. People buy lagger with sympathy but it never catch up. So learn to sell worst performer and keep the best a little longer.

I: Institutions are the key buyers of a growing stock. Buy only those stocks that have at least a few institutional sponsors with better-than-average recent performance and have added institutional owners in recent quarters.

M: Market direction is more important that all rules above. In bear market, stocks usually open strong and close weak. In bull market, stocks usually open weak and close strong. The general market averages need to be checked every day. The use of limit order is not recommended because you want to move fast.

And the most important two topics:
To detect a market top, keep a close eye on those composites and indices. On one of the days in uptrend, volume will increase but the price increase becomes smaller, which is "heavy volume without further price progress up". The average may close down for the day, making the distribution easy to see. After four or five days of definite distribution over any span of four or fives weeks, the market will almost always turn down. After the first day's rebound, the second day will open strongly but suddenly turn down near the end of the session.

To recognize the market bottom: A rally attempt begins when a major market average closes higher after a decline that happened either in the day or during previous session. Starting on the fourth day of the attempted rally, look for one of the major average to follow through with a booming gain on heavier volume than the day before. When a bear market bottoms, it frequently pulls back and settles above or near the lows made during the previous few weeks. Remember, no new bull market has ever started without a strong price and volume through confirmation.

[Bianca A. · Rating 2 out of 5]

Originally published in 1988 and then republished in 2008. Entrepreneur, stockbroker and writer William J. O'Neil attempts to give tips to rookies about stocks.
Although better written than most stock literature, it's still just a big tease with the goal of self-advertisement that piggy-backs on empty promises, but may succeed just enough to keep you coming back for more (of his books or other genre books). It's just the "start" that is meant to get you interested in the market and possibly in the job.
Stock market trade remains something that only people with a lot of money can generate profit out of and regular folks like you and I should not dab into it at novice level by ourselves. If you've got money to invest and you're a beginner, go to a stock broker. If you want to be a stock broker, go to college. The financial and economics sector is vast and intricate and difficult to master and honestly if you're an entrepreneur busy running your business you do NOT have time to be continually informed on your own about the stock market changes. One book or 10 books on the "stock exchange" by some "gurus" is not going to do anything for you. The market is tough to predict, if at all possible, as many factors out of our control of foresight are at the base of it (unless you are a groomed expert, and even then who knows if you'd struggle or not).

[Raphael Bernardo · Rating 4 out of 5]

I mostly read biographies and other non fiction. Even so this was a hard read for me because it was packed with theories and data or history to back it up. Maybe a few personal stories here and there(I read those faster). I had this book in my house for a while but didn't realize it was a classic until I read Michael Lewis's The Big Short, and found one of the people who saw the crash coming(and made 100+million off of it) had been using this method as a guide along with other sets of strategies, but this was one of them.

Knowing that helped a lot because halfway through I started to question if this book is just one big sales pitch. After reading an entire chapter dedicated to promoting their product I started to notice every other page has their product mentioned as being used to make a critical decisions.

I just finished, so I'm still not sure what I think of the book. Their method seems way too perfect. I couldn't find much information about their Company or William J. O'Niel. He has a net worth of $100 million but most of his Wikipedia is about his products. Also all the people in the testimonials who made money mentioned they made it in between 1996-2000. Anybody with a brain could have made money during that time.

A lot of the methods in the book contradicts everything everybody says (ex. Doing things the Warren Buffet Way and Buying a good company like Coca Cola to keep for 10 years...everybody I've met cites Buffet the way every business person I've met says 'like Steve Jobs' after every sentence) and that made it very attractive. I really want to believe what I read works, but I might have to buy a subscription to their database to do it in the best way possible. I'm skeptical for that reason.

I'm giving it 4 stars because it's a classic, William J. O'Neil includes a great story about how he made millions by betting everything he owned on margin multiple times, and besides the sales pitch it is a pretty good book. I'm not a big investor but I have heard money managers say a lot facts he mentioned as doctrine...which may or may not be a good thing.

[Katie O'Bryan · Rating 5 out of 5]

A momentum investor, watch the charts, look for signs of heavy & tightly traded institutional interest for 4 to 5 weeks, cup & handle patterns, cut losses at 8%, & only work with the absolute best in terms of fundamentals.

[InvestingByTheBooks.com · Rating 5 out of 5]

William O ́Neil was born in 1933 and in 1963 he founded the company that bears his name. His company developed the first computerized daily securities database and he is still very active promoting his services of which this book probably is his bestselling tool. Based upon his research studying the track record of past investor legends and what the best performing stocks have in common, he developed his investment strategy, called CAN SLIM. This focuses on buying stocks that are performing relatively strongly as well as having a fundamental momentum. The first version of the book was published in 1988, and since then I have had the pleasure of reading the following four editions of this book. They don’t differ much from the original but have updated comments.
O ́Neil’s key message is to focus on momentum, and change. Instead of fearing or having disbelief in stocks that trade on 25-50 times earnings and making new highs, he advocates them using his CAN SLIM system. I think every value investor should read this book. It would prevent them from buying apparently cheap value traps in bad industries etc.

The book is divided in 3 parts. In the first part it’s all about his winning system, CAN SLIM. The second part is called, “be smart from the start” and the third part is called “investing like a professional”. It’s written in a very easy language, but to me it’s a bit too much of a commercial. The negatives with this book are that’s sometimes I get the feeling that the book is written with the sole purpose of promoting O’Neill’s newspaper and brokerage business. Another negative is that very rarely are there any issues or problems with his strategy. But overall the positive clearly outweighs the negatives.

The CAN SLIM method is an easy to understand framework to give you necessary focus on the dynamics of the stock, and its fundamentals. It focuses you on Current and Annual earnings growth as well as what is driving that, what is the New; products, management etc. After the fundamentals, it also looks at the chart, and some technical factors, Supply and demand for the stocks, if a stock is a Leader/Laggard in the market, in its industry, does it have Institutional sponsorship and finally in what direction is the overall Market heading. Compared to other authors that advocate a more dynamic approach to stocks like Jesse Livermore, Edvin Lefewre, or pure technical ones like Martin Pring, this actually brings the fundamentals to the forefront, trying to learn from previous success stories in the stock market, and to see to what extent these new ideas qualify as a potential ten-bagger.

In the early 90’s I found myself too often buying stocks that had fallen out of favor and were looking cheap, only to learn they could get cheaper and also that there could be good reason for the cheapness. Bad fundamentals often turned into even worse fundamentals, and maybe even structural issues. After reading this book I got a more focused on what drives stocks, positive news (for big moves). I think all value investors, like me, should read this book to focus to a larger extent on growth and opportunities. Or at the very least avoid cheap stocks in dying industries, were often a “new technology growth” company are changing the dynamics of the industry. Think for example about Amazon vs companies selling electronics/books etc.

As a final note, O ́Neil’s favourite book is Gerald Loeb’s, The Battle for Investment Survival. This is another book to recommend if you need a more dynamic approach to your investing.

[Karen · Rating 4 out of 5]

I’m about halfway through this book. It’s an interesting read, providing a primer for fundamentals and numerous stock chart examples.

[Chintushig Tumenbayar · Rating 4 out of 5]

Хөрөнгө оруулалтын чиглэлийн түүхэн номнуудыг нэгийг сонгон авч уншлаа. Хувьцаанд хэрхэн хөрөнгө оруулах талаар зөвлөсөн зөвлөгөө нь одоог хэр нь үнэ цэнэтэй хэвээр санагдлаа. Номыг шинэчилэн найруулах бүрдээ тухайн цаг үеийн өөрчлөлтүүдийг нэмж тусгасан нь уг номыг илүү үнэ цэнэтэй болгосон байна.

[Alise R · Rating 1 out of 5]

Fugly white dudes will read this and call themselves entrepreneurs

[Michael · Rating 5 out of 5]

I traded the O'Neil CANSLIM method covered in this book for about 8% a month 10 years ago. Having daytraded for 2.5 years in recent years, I probably wouldn't be comfortable trading this method during the current economic situation.

The CANSLIM is great for finding quality stocks. One could apply it to a shorter time frame than suggested in the book and still be trading a strong stock, which of course gives you greater chances for a successful trade. Sounds simple doesn't it. Ha!

[Wayne · Rating 2 out of 5]

Overall I think that the author has some good information that he is strying to get across, but unfortunately I felt that his writing and education style was poor. For a subject that I generally find very interesting, it was a dry book that I was definitely ready to put down once I reached the end. This is more of a reflection of his presentation of the information rather than is message.

[Marco den Ouden · Rating 5 out of 5]

See my review here: How to Make Money in Stocks

[Huy · Rating 1 out of 5]

Instead of reading this book, you can find a broker. He/she can tell you the same thing. More informative & trendy, less about subcribing to the xyz products.

[Quang · Rating 4 out of 5]

Good book for fundamental analysis of the stocks. More for hodlers, I think.

[Ernesto Alcantara · Rating 4 out of 5]

Excellent blend of fundamentals and technicals for picking prime stocks

Most of this books has valuable lesssons on what to look for when picking the next big stock. Combining extensive historic chart data and pointing out the key fundamentals to look for the author shows how great companies have previously made big runs in the market and how you can develop the skills to pick innovative growth stocks in the future.

He also highlights his CAN SLIM methodology: Current results , Annual results, New, Supply, Leader/Laggards, Innovation, Market. This is very important to understand not only fundamentals that drive price action but also how to know what the market is telling you and understand IBD methodology and data.

There are some latter portions that are marketing the IBD methodology, product and services. Although I use some of them it distracted a bit from the core message of the book but you can either skip it or learn something new.

I will have this as a reference to improve my skills, to remind me of possible key mistakes and rules to follow to be successful in the stock market.

[Dom · Rating 5 out of 5]

Favorite investing book I’ve read yet. Go slow and take notes, you will learn a ton. Appreciate the perspective of being “stock historians” rather than stock analysts spouting out personal opinions. Only thing to be aware of… it’s definitely a giant ad for investors business daily but that’s understandable because IBD will become your friend after understanding the concepts taught in this book. Would recommend to anyone passionate about trading.

[Carl · Rating 3 out of 5]

Let’s see if I get rich!!!

[Jonas · Rating 5 out of 5]

By far the best investment book that I have ever read!

[Tarik · Rating 5 out of 5]

Great read. One of the old style writers that actually attempts to provide good advice to their readers. A person with historical outlook providing guidelines to reduce your risk.

Skip the political stuff towards the end.

[fraulein · Rating 5 out of 5]

Hal berharga yg bisa didapat di buku ini:

1. Cara beli pake metode CAN SLIM. Saya blom pernah pake sih. Susah, jd bikin malas. Susah cari yg memenuhi smua kriteria, blm lagi nnt mst digabung pake chart. Klo yg gk sabaran pasti males. Tapi saya tahu ada yg pernah pakai (C)urrent Q EPS dan (A)nnual earning increases buat nyari satu saham dan memang kemudian terbukti sahamnya winner. Tp sbenernya metode ini scr nggak langsung bahas top down analysis, jd sangat menarik untuk dibaca dan diresapi lbh dalam.

2. Cara jual klo loss. Terus terang saya ngakak berat baca bab ini. Opa ONeil kyk uda bisa baca pikiran trader yg suka didera floating loss , malah jd semacam pembahasan psikologi trading dengan banyak saran berharga. Saya awalnya mengharap nemu bbrp metode u/ menentukan titik cut loss, tp dikasih resep cuma satu: turun 7-8% dr harga beli, cut! No exception. Seneng saya, soalnya ga suka ribet. Tp mungkin tdk cukup buat yg ingin lbh meticulous atau penganut paham avg down. Disesuaikan saja dg preferensi masing2.

3. Cara jualan u/ realisasikan profit. Nah, di bab ini baru dikasih banyak opsi jualan sama Opa. Jd sesuai sama prinsip: cut your losses short and let your profit run. Semua caranya based on chart, jd memang perlu keahlian dan jam terbang. Tp ada yg mudah kok, saya (baru) memutuskan u/ pakai yg mudah2 itu. Dan ga ada disuruh pake trailing stop. Haha. Saya ada kenal seorang ONeilian yg 15 thn survive di bursa dan nggak pernah pake trailing stop. Tergantung preferensi masing2 juga.

4. Bab 12. Sebetulnya bab pertama yg langsung saya baca adalah bab ini krn lg semangat2nya belajar teknikal. Ya salah sih urutannya, hahaha. Tau cara beli tu penting dan jauh lbh penting tau cara jual. Jd saya sarankan bacanya sesuai urutan daftar isi aja. Haha. Bab 12, cara baca chart. Di bab ini Opa membagikan bbrp pola chart berharga. Sedikit catatan mengenai pola ONeil sbb:

Pertama, ONeil bilang klo saham yg kuat itu harus menunjukkan kekuatannya. Jd, seblom membentuk base, prior trend saham mst naik 30%. At least pula. Konsekuensinya, ada pola yg klo di buku lain adlh reversal pattern, di Oneil jd continuation. Menurut kenalan ONeilian saya, ONeil adlh satu dr sedikit yg memakai struktur harga dlm analisis pola chartnya, saya ngartiinnya sbg reliability krn spy bisa nemu struktur harga pasti pakai riset. Dan memang ada salah dua atau tiga polanya yg sangat kuat tapi langka. Susah nemunya dan susah confirm nya.

Kedua, klo mau disiplin pake pola ONeil, bersiap jd pasukan genteng alias highlander. Soalnya belinya pas break base atau di buy point yg rata2 di area leher pattern/base. Buy high, sell higher. Klo biasa di selokan pasti akan agak terganggu psikologisnya, kek saya. Klo kata Opa, klo base/pattern nya emang bagus, jarang koreksi sampe 8% dari buy point yg bener. Nah. Saya rasa kuncinya brati penerapannya nggak boleh stengah2. Saya? Tentunya msh stengah2. Hahaha. Maapkan, Opa.

Oya, Opa jg ngasih peringatan: klo market lg bear, ya jangan harap pattern nya bakal bekerja. Iyalah, ya. Jgnkan naik 30%, 10% aja uda empot2an kali ya, pst uda pada tepe duluan. Trus jg, penjelasan pattern langkanya cuma bbrp kalimat doang. Nggak detil, jd mst cari2 referensi lain. Klo ga salah, di buku Bulkowski jg ada.

Last but not least, walopun bukunya ga bahas teknis banget, tp menurut saya klo belum menguasai dasar2 teknikal mungkin agak kesulitan. Tp dicoba saja, siapa tahu bisa dpt insight menarik. Kalimat2 Opa nggak njelimet dan sangat tepat sasaran, jd enak banget bacanya. Kyknya ada yg versi terjemahan, tp saya menyarankan baca yg bhs Inggris aja agar tepat interpretasi.

Masih ada bbrp bab lain, tp menurut saya yg esensial yang di atas saja (saya jg blom baca bab2 belakang. Haha).

Buat si bapak yg ngasih satu bintang: klo beda aliran, klo mau baca, kosongin dulu gelasnya setengah. Klo terlalu penuh mungkin akan kelewatan bbrp berlian fundamental.

[Ash Turki · Rating 2 out of 5]

this book is more about speculating but not investing all the methods explained are good in theory not in practice for instance talkin about eps .. theres so many different kinds of eps comming from selling thier assets or things like that would be misjudged by new or unexperienced investors, moreover, talking about techinical analysis, why would the writer attack everybody who dont believe in technical analysis, this is a very weak way to convince the readers by technical analysis besides technical are for speculators .. i wouldnt give this book more than 2 stars, its name is bigger than its content

[Trần Lệ Mẫn · Rating 4 out of 5]

This book is to provide you about stock market and how to make money from it. Although I started reading when I didn't have much knowledge and experience about even stock trading but also general investment but I have collected something useful in selecting a good company and how to trade in Stock Market. You can't be rich that you just work with 8 hour job at office, find the way how to let money work for you.

Something you might got after completing this book:
- How to choose a good stock based on CAN SLIM standard
- When you cut the loss
- How many core stocks should hold
- How to analyze the chart to decide when buy and sell.
- ...

It is a very good book for beginners.

[JP · Rating 5 out of 5]

The foundation of this classic by William O'Neil is his CANSLIM framework. He adds a richness of other ideas, including learning when to buy, when to sell, and how to develop your own style. The book is also filled with charts throughout, such that you sometimes need set it aside and return later with fresh eyes. The 4th edition includes data back into the 19th century all the way through the 2008 financial crisis. I'm glad I took the recommendation for this book made to me by a master technician I work with.

[Emily Barrett · Rating 5 out of 5]

I'm a novice Investor and can say that this book is GREAT! If you want to start trading but don't know where. This is the book. Will talks about the "CANSLIM" method and why it's essential when picking winning stocks.

I listen to the audio version on the treadmill. 2 chapters a week. I'll listen to and re-read the book over and over again. There's always something I need to learn.
This is a great place to start.
I follow his once-upon-a-time "apprentice" Gill Morales on Twitter and subscribe to his emails. (Those are great too)

[J · Rating 4 out of 5]

I was able to develop a successful investment strategy 2 years ago, based on the invaluable information provided in this classic. The essence of the system here is to combine fundamental and technical analysis to scan out best performing stocks in the market which works out really well.

On the contrary, honey is just in the beginning few chapters and remainder is filled with IBD advertising and ineffectual information.

[Ron Livaudais · Rating 5 out of 5]

A winning system for guaranteed success in the market!

William O’Neill has done the heavy lifting. He has researched
how the market really works based on history, has put a few
rules together to help navigate one to success in the market which then helps you achieve confidence in your investing decisions.

[Elius Bessard · Rating 4 out of 5]

It was great, showed a lot of key thing to look for in finding a good stock and the importance of risk management, I didn't intensely read through all of it but by skimming through, I was able to get some information to better help me choose better stocks. It is full of examples and I know I will probably have to return to this book whenever I am in a slump with trading in the future.