Ask Colin

What is the best education in Australia for a share trader?

This was the detailed question:

I recently came across your [web]site as I have been briefly researching the CANSLIM method.  I read the Nicholas Darvis book that got me very interested in stock trading, (I actually use a very similar swing trading strategy on the currency markets currently as a currency trader).  As such, I have a knowledge base (for currencies) on technical analysis.  I came across the CANSLIM method from Investors.com.   

I am preparing to move back to Aus[tralia] from London and Brazil early next year.  I would like be pointed in some direction as to which way I should go for learning more about stock trading. Shall I, in your opinion, continue with the CANSLIM method ...

I understand that you use some of the characteristics of the CANSLIM method ...

Also, you mention with the CANSLIM method and using it in Australia, there will be a lot of research involved.  I intend on stock trading alongside other ventures including my currency trading, possibly work or running a business.  I understand completely that learning to trade in the stock market requires time, learning and complete commitment, I also do not want to commit myself to something to great.  Is the CANSLIM method a style of trading that might be possible, on average with say 5 hours (for the sakes (sic) of determining a level of time commitment, which I understand is likely very difficult to put a number too (sic) a week or something in that region if it is possible to estimate.  This is considering I have learnt it all and am using it after the learning period.

 

I do not want you to join my website to learn trading and be disappointed when that it does not happen, so let me be very clear: I do not trade stocks. I am not a trader. I am an investor. That means that I buy part ownership of good businesses from which I earn an income stream in the form of dividends and franking credits. If I have invested in businesses that grow, then the retained earnings will generate capital growth over time. My analysis of historical returns suggests that the compound growth rate that can be earned from investing will tend to be about triple the return to be expected from trading. This is pre-tax and is basically true after tax as well.

 

Nothing is ever truly original in this  world, and investing is no exception. You say I use some CANSLIM ideas, but they are quite recent and not original, just an amalgam of those  that have gone before and his experience. Likewise, my investment methods have been developed from my study of investing and trading methods over the last 130-odd years. I have read somewhere between 400 and 500 books (I lost count long ago). So, my methods are an amalgam of all my study and honed from 50 years of experience. Those writers who have most influenced me (in no particular order, but as they come to mind) are Richard Wyckoff, Joseph Schumpeter, Phillip Rennie, Alexander Wheelan, Benjamin Graham, Alexander Elder, Edwards & Magee, Charles Dow, Richard Schabacker, Edwin Coppock, Martin Pring, John Murphy, John Maynard Keynes, David Fuller, Bernard Barach, Jesse Livermore, David Dreman John Kenneth Galbraith, Trevor Sykes, Gustave LeBon, Gerald  Loeb, Phillip Lynch, Humphrey Neill, William Sherden, Vilfredo Pareto and many others. There are longer lists in both my books, but those lists are far from all I have read and studied. This list covers investing, economics, trading, risk management, behavioural finance, history and more. Companies we invest in exist in an economy and a world, the totality of which we must seek to understand if we are to succeed.

 

Each of us is different in so many ways. One thing above everything else that I teach is that we must study, think through and mould a method that fits who we are and what we bring to the task. A large part of the “key” to investing is not about how to make money, but how to manage risk and how to value a business so that we do not pay too high a price for it. There is no single best way to do this and in many ways it is an insoluble problem, the solution to which we can only approach and is an endlessly fascinating intellectual journey.

 

My methods are set out in my main book Building Wealth  in the Stock Market and are further developed and taught on my website. I teach investing, not a method. If you just try to copy my method, or anyone else’s, I believe you will fail. You have to work out what is right for you. It is a lifetime study.

 

On the other hand, if you wish only to be a trader, as your email suggests, then my friend Dr Alexander Elder is in my opinion the best teacher of short term trading in the world. His main books are The New Trading for a Living and Come Into My Trading Room.

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