CANSLIM Trading Method

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Written By
Dan Buckley
Dan Buckley is an US-based trader, consultant, and part-time writer with a background in macroeconomics and mathematical finance. He trades and writes about a variety of asset classes, including equities, fixed income, commodities, currencies, and interest rates. As a writer, his goal is to explain trading and finance concepts in levels of detail that could appeal to a range of audiences, from novice traders to those with more experienced backgrounds.

The CANSLIM trading method is a popular investment strategy that combines fundamental and technical analysis.

Created by William J. O’Neil, the method is a formula to identify potential high-performing stocks before they make significant price advances.

As an acronym, CANSLIM stands for seven key components that O’Neil believed to be common characteristics of the most successful stocks.


Key Takeaways – CANSLIM Trading Method

  • CANSLIM is an investment/trader strategy developed by investor William O’Neil, combining both fundamental and technical analysis to identify potentially profitable stocks trades.
  • The acronym CANSLIM stands for seven key factors:
    • Current earnings
    • Annual earnings
    • New products or services
    • Supply and demand dynamics
    • Leader or laggard
    • Institutional sponsorship, and
    • Market direction
  • The CANSLIM method emphasizes the importance of buying stocks with strong earnings growth, high relative strength, and significant institutional support, while also considering broader market trends and the company’s competitive advantages.
  • It aims to identify stocks with the potential to outperform the overall market (with no guarantee that they will from using the system).


Understanding the CANSLIM Trading Method

The main premise of the CANSLIM method is to buy stocks right before they break out to new highs.

This involves the selection of stocks that exhibit each of the seven traits outlined in the CANSLIM acronym.

The method is designed to identify growth stocks, which are companies that are expected to grow at an above-average rate compared to other companies in the market.


The Seven Components of CANSLIM

Let’s take a closer look at what each letter of the CANSLIM acronym stands for.

Current Quarterly Earnings and Sales (C)

The “C” in CANSLIM stands for “Current Quarterly Earnings and Sales”.

This component emphasizes the importance of a company’s recent earnings and sales performance.

According to the CANSLIM method, investors should look for companies that have a significant increase in their current quarter’s earnings per share (EPS) compared to the same quarter in the previous year.

Annual Earnings Growth (A)

The “A” in CANSLIM stands for “Annual Earnings Growth”.

This refers to the consistent growth in a company’s earnings on an annual basis.

Investors should look for companies that have demonstrated an increase in annual earnings over the last ~5 years as a general rule.

New Products, New Management, New Highs (N)

The “N” in CANSLIM stands for “New” – whether it’s new products, new management, or new price highs.

According to O’Neil, companies often experience a significant increase in their stock price when they introduce innovative products (producing for sale, not just announcing), have a change in management, or when their stock price reaches new highs.

Supply and Demand (S)

The “S” in CANSLIM stands for “Supply and Demand”.

A basic economic principle, the balance between supply and demand can significantly affect a company’s stock price.

In the context of CANSLIM, investors should look for stocks with increasing demand, which is often indicated by an increase in trading volume (though that can work in reverse too).

Leader or Laggard (L)

The “L” in CANSLIM stands for “Leader or Laggard”.

The method encourages investors to invest in leading stocks in a leading industry, rather than laggard stocks.

A leading stock is one that is outperforming the market, while a laggard stock is one that is underperforming.

Institutional Sponsorship (I)

The “I” in CANSLIM stands for “Institutional Sponsorship”.

This refers to the involvement of institutional investors, such as mutual funds and pension funds, in a company’s stock.

According to the CANSLIM method, stocks that are supported by a substantial number of institutional sponsors often outperform those that lack such sponsorship.

Market Direction (M)

The “M” in CANSLIM stands for “Market Direction”.

The overall trend of the market can have a significant impact on an individual stock’s performance.

According to the CANSLIM method, it is best to invest when the market is in a confirmed uptrend.


Application of the CANSLIM Trading Method

The application of the CANSLIM trading method involves a disciplined and methodical approach to stock selection.

Investors must perform diligent research to identify stocks that meet all the criteria outlined in the CANSLIM method.

Once a potential stock is identified, it is crucial to monitor its performance and make investment decisions based on both the stock’s characteristics and the overall market trend.


Advantages and Disadvantages of the CANSLIM Trading Method

Like any investment strategy, the CANSLIM trading method has its pros and cons.


The CANSLIM method is grounded in concrete, measurable factors, which can add objectivity to the investment decision-making process.

It combines both technical and fundamental analysis, allowing investors to consider both a company’s financial health and market behavior.

Furthermore, the method encourages investing in growth stocks, which have the potential for high returns.


However, the CANSLIM method requires a significant amount of research and analysis, which can be time-consuming and require expertise.

It also assumes that past performance can predict future results, which is not always the case.

Additionally, investing in growth stocks can be risky, as these stocks are often more volatile than their counterparts.


Trade Like a WILLIAM O’NEIL Disciple (How To Make Money In Stocks)


FAQs – CANSLIM Trading Method

What is the CANSLIM trading method?

CANSLIM is a growth stock investing strategy designed to identify potential high-growth companies before they start their major run-ups.

It was created by William O’Neil, a stockbroker.

The acronym CANSLIM stands for Current quarterly earnings per share (C), Annual earnings growth (A), New products, services, management, or price high (N), Supply and demand (S), Leader or laggard (L), Institutional sponsorship (I), and Market direction (M).

How does CANSLIM work?

The CANSLIM method works by analyzing a combination of a company’s fundamental and technical aspects.

It considers current and annual earnings, new products or services, the supply and demand of the stock, whether the stock is a leader or laggard in its market, institutional sponsorship, and overall market direction.

What is the significance of Current and Annual earnings in CANSLIM?

Current and Annual earnings are important to the CANSLIM strategy because they reflect a company’s financial health.

A company with strong current and annual earnings is likely to have the financial capacity to invest in growth (or return cash to shareholders via buybacks or dividends), which may drive the stock price up.

What does “New” stand for in CANSLIM?

“New” in CANSLIM refers to new products, services, management, or price highs.

These factors can all act as catalysts to push a stock’s price higher.

A new product or service can generate increased revenue, a new management team can bring fresh strategies, and a new price high can attract more investors.

How does CANSLIM use the concepts of “Supply and Demand” and “Leader or Laggard”?

Supply and Demand in the CANSLIM method refers to the stock’s trading volume.

High trading volume often indicates strong investor interest and can lead to price increases.

The “Leader or Laggard” concept means that the strategy prefers stocks that are leaders in their industry or market segment, as these stocks are often the ones with the most potential for significant price increases.

Why is Institutional Sponsorship important in CANSLIM?

Institutional sponsorship, or the ownership of a stock by large investment institutions such as hedge funds or pension funds, is a key component of the CANSLIM strategy.

These institutions can have a significant impact on a stock’s price due to the large volumes of shares they buy or sell.

A stock with increasing institutional sponsorship is often seen as a positive sign.

How does CANSLIM consider the overall Market Direction?

The final component of CANSLIM, Market Direction, involves analyzing the overall trend of the market.

It recognizes that even the best stocks can struggle if the overall market is in a downtrend.

Therefore, it recommends investing in growth stocks during a bull market and being more cautious during a bear market.

How can I apply the CANSLIM method in my trading?

To apply the CANSLIM method, you should start by analyzing the earnings and other fundamental aspects of a potential investment.

Look for companies with strong current and annual earnings growth, new products or services, and increasing institutional sponsorship.

Then, consider the stock’s technical aspects, such as its trading volume and whether it’s a market leader.

Finally, take into account the overall direction of the market before making any investment decision.

You can also take the criteria and consider it alongside others.

Are there any limitations or risks with the CANSLIM method?

Like any investment strategy, the CANSLIM method has its limitations and risks.

It requires a significant amount of research and understanding of both fundamental and technical analysis.

It also relies on the assumption that past performance can predict future results, which isn’t a reliable assumption.

Additionally, the CANSLIM method may not be suitable for all investors, especially those with a lower risk tolerance or a preference for dividend-paying stocks.

Where can I learn more about the CANSLIM method?

You can learn more about the CANSLIM method by reading William O’Neil’s book “How to Make Money in Stocks”.



The CANSLIM trading method is a comprehensive investment strategy that combines fundamental and technical analysis.

While it requires a significant amount of research and diligence, it can help investors identify high-performing stocks and potentially yield high returns.

As with any investment strategy, it’s essential to understand the method thoroughly and consider its risks and rewards before implementing it in your investment portfolio.