how to make money in stocks complete investing system

The How to Make Money in Stocks: Complete Investing System

how to make money in stocks complete investing system refers to William J. O'Neil's book and the CAN SLIM methodology for selecting and timing U.S. equity investments. This article summarizes the book, its editions, the seven-part CAN SLIM rules, charting and screening practice, practical workflows, evidence and critiques, and resources to explore the method further. Readers will learn: what each CAN SLIM letter means, how to screen and read bases, how to manage position size and stops, and where to find data and tools to implement the system.

Background

Author — William J. O'Neil

William J. O'Neil is a U.S. investor, entrepreneur and author who founded Investor's Business Daily (IBD). He began his career as a stockbroker and equity researcher, compiling performance records and identifying common traits among winning stocks. O'Neil developed the CAN SLIM framework from both quantitative review and practical trading experience, then published his ideas to help retail and institutional investors identify high-growth, momentum-driven stocks. His work combined fundamental EPS growth requirements with technical pattern recognition and market timing rules, creating a rules-based system that emphasized both selection and timing.

Publication history and editions

The original How to Make Money in Stocks was first published to wide attention; later editions expanded content and integrated charts, case studies and screening checklists. The Complete Investing System edition bundles the CAN SLIM rules, practical examples, updated charts and references to IBD's proprietary ratings (EPS ratings, RS ratings, etc.) and includes formats such as print, ebook and audiobook. As of 2025-12-31, according to Amazon and Google Books listings and library catalogs, the Complete Investing System edition and earlier editions remain widely available in multiple formats and continue to be referenced in investor education.

Overview of the System

CAN SLIM acronym

The CAN SLIM framework is a seven-letter mnemonic summarizing the system's selection and timing filters. Each letter highlights a dimension to screen or confirm:

• C — Current quarterly earnings per share (EPS) growth: focus on accelerating, strong quarterly earnings growth compared with the prior year.
• A — Annual earnings growth: several years of increasing annual earnings and return on equity, indicating durable growth.
• N — New: new products, new management, new highs, or new markets; novelty often attracts buying interest.
• S — Supply and demand: shares outstanding and float, buybacks, and the supply-side dynamics that can magnify price moves.
• L — Leader or relative strength: stocks that lead their industry in price performance and show strong relative strength (RS) ratings.
• I — Institutional sponsorship: evidence of institutional buying from funds and analysts, signaling a credible demand base.
• M — Market direction: overall market trend and index behavior; even good stocks can struggle in a weak market.

The system blends fundamental growth evidence (C and A) with technical confirmation and supply-demand signals (N, S, L, I) and adds market timing via (M).

Philosophy and market premise

At its core, the CAN SLIM approach argues that superior returns come from identifying companies with accelerating earnings growth that are also attracting buying demand and showing price leadership. The method assumes that fundamental growth provides a reason for eventual price appreciation, while momentum and institutional participation accelerate moves. O'Neil emphasized that selection without proper timing (M) and technical confirmation (L, volume breakouts, base patterns) increases the risk of poor outcomes. Thus the system is both a stock-selection and trade-management framework.

Components of the Complete Investing System

Fundamental criteria (C and A)

C — Current quarterly earnings: O'Neil prioritizes companies reporting strong year-over-year quarterly EPS growth, often looking for percentage increases well above market averages. He emphasizes not only the absolute growth number but acceleration — consecutive quarters of improving growth rates signal momentum in fundamentals.

A — Annual earnings: consistent multi-year annual earnings growth and improving return-on-equity (ROE) are central. O'Neil recommends examining several years of annual results to ensure that quarterly strength is backed by longer-term profitability trends. The Complete Investing System provides thresholds and examples to judge the quality of earnings growth; practitioners often use minimum percentage cutoffs for both quarterly and annual increases when screening.

Qualitative/new factors (N)

N stands for "New." This can mean new products or services, new management, new industry trends, or when a stock reaches a new price high. Novel developments create investor attention and can expand a company's addressable market, thereby attracting more buying demand. In chart terms, stocks making new relative highs are more likely to attract momentum buyers. The "N" criterion helps explain why two companies with similar fundamentals may diverge: a new catalyst can be a tipping point for market interest.

Supply, demand, and share structure (S)

S covers supply and demand dynamics. Important considerations include shares outstanding and the public float — fewer shares available to trade (a small float) can amplify price moves on buying interest. Share buybacks, insider ownership and restrictions, and recent issuances (dilution) also affect the supply side. O'Neil highlights that understanding how many shares are available and whether supply is shrinking (buybacks) or expanding (secondary offerings) is essential in forecasting price action.

Relative strength and leadership (L)

L stands for "Leader". O'Neil taught that the market tends to reward industry leaders with above-average price performance. Relative strength (RS) measures how a stock performs versus the broader market or its peers over specified time windows. IBD developed RS ratings (e.g., a 1–99 scale) to rank leaders; stocks consistently in the top deciles are considered strong candidates. The Complete Investing System explains how to read RS lines on charts and interpret leadership at both the stock and sector level.

Institutional sponsorship (I)

I reflects institutional sponsorship: whether mutual funds, pension funds, hedge funds and analysts are buying a stock. Institutional buying provides sustained demand and often helps drive larger, more reliable trends. O'Neil advised reviewing SEC filings, fund-holding reports, and IBD's proprietary institutional sponsorship metrics to gauge whether institutions are supporting a move. However, rapid increases in sponsorship sometimes occur after significant price rises, so timing and interpretation matter.

Market direction (M)

M is the market — the macro backdrop and overall trend. O'Neil argued that market direction determines a high percentage of individual stock performance: in a confirmed uptrend, leading stocks are more likely to break out successfully. He proposed rules and indicators to assess market health (index chart patterns, moving averages, and market participation metrics). If the market is weak, even fundamentally strong and technically sound stocks often underperform.

Technical and Chart Patterns

Base patterns and buy zones

O'Neil emphasized buying at constructive chart patterns called bases. Common bases include cup-with-handle, flat base, consolidation, double-bottom and tight bases following prior runs. Each base has a defined buy zone — the price range just above a pivot (the highest point in the base where a breakout is confirmed). Good practice is to buy within the buy zone and preferably close to the pivot. The Complete Investing System gives visual examples and specific rules for identifying valid bases and avoiding choppy patterns that increase risk.

Volume and breakout confirmation

Volume confirms breakouts: price moves with rising volume, especially on the breakout day and the days immediately after, suggest genuine buying interest. O'Neil taught readers to look for higher-than-average volume on breakouts relative to the stock's typical daily volume, and to prefer breakouts that show follow-through rather than immediate failure. Volume anomalies (spikes without price follow-through) can signal distribution or manipulation and warrant caution.

Stop-losses, position sizing, and exit rules

Risk management is integral. O'Neil recommended predefined stop-loss levels — percent-based cutoffs to limit downside — and trailing stops to lock in gains. Position sizing depends on the investor's risk tolerance, but the book suggests limiting any single position to a small percentage of the portfolio to avoid outsized losses. Exit rules also include selling on fundamental deterioration (falling EPS or revenue), failure to hold a buy zone, and signs of distribution (heavy volume price declines). The Complete Investing System outlines common percent stops and trailing techniques used by practitioners; when quoting exact percent stops, consult the edition and chapter citations for the specific rule language.

Research, Tools, and Data

IBD and screening tools

Investor's Business Daily (IBD), the organization O'Neil founded, provides proprietary ratings and screens implementing many CAN SLIM filters: EPS ratings, RS ratings, industry group rankings and screens for earnings acceleration and relative strength. The Complete Investing System often references these tools as practical ways to generate candidate lists. Modern investors can approximate the system using public data and third-party charting platforms that compute earnings growth, RS, moving averages and volume metrics.

Data sources and quantitative screening

Implementing CAN SLIM requires access to timely earnings, revenue, institutional holdings, float and price-volume data. Investors use stock screeners to filter on quarterly and annual EPS growth, float size, RS percentiles and whether a stock is approaching a pivot. Regular data frequency is important — many CAN SLIM rules rely on the most recent quarter’s report and daily price action. In the Complete Investing System, O'Neil provides example screens; numerous public and subscription services offer the necessary data to run similar filters.

Practical Application

Step-by-step implementation

A typical CAN SLIM workflow combines screening, chart review and trade management:

1. Screen for fundamentals: filter for strong current quarterly EPS growth and multi-year annual growth plus high ROE.
2. Narrow by supply and novelty: remove heavily diluted names and prefer stocks with new catalysts or new-high behavior.
3. Screen for relative strength and industry leadership: keep stocks with top RS ratings and strong sector groups.
4. Review charts: identify constructive bases, buy zones and pivot points; verify volume behavior and recent price action.
5. Check institutional sponsorship and insider activity for demand confirmation.
6. Confirm market trend: ensure major indexes and market participation indicators are in a favorable phase.
7. Execute buys within buy zones with a predefined stop-loss and position size.
8. Monitor trades daily for breakouts, follow-through buying, signs of distribution, and for any change in fundamentals.

This process is iterative: new data can add or remove candidates, and the trader must adapt position sizing and stops accordingly.

Example trade case studies

The Complete Investing System includes historical examples of winners that met CAN SLIM criteria and of losing trades that violated rules (e.g., buying after a breakout failure or ignoring market direction). Case studies show how early identification of accelerating EPS and a tight base led to outsized moves, and how failures to respect buy zones or market trends caused losses. Practitioners benefit from studying both positive and negative examples to see how rules matter in real time.

Performance, Evidence and Academic View

Reported results and anecdotal performance

O'Neil and IBD present case studies and performance anecdotes showing outperformance of CAN SLIM-style selections during strong market regimes. Reports often highlight high-return winners discovered early after constructive bases and earnings accelerations. These accounts illustrate the method's capacity to identify rapid-growth winners, though they are not formal academic backtests.

Academic critiques and limitations

Scholars of finance recognize momentum and earnings acceleration as return predictors, but academic critiques apply to practical CAN SLIM implementation: survivorship bias in anecdotal examples, transaction costs and taxes for frequent trading, and time and data requirements for rigorous screening. Momentum-based and growth-oriented strategies can underperform in value-led or defensive market regimes. Academics also note that published thresholds (e.g., minimum EPS growth percentages) may require adaptation to evolving market environments and data sources.

When discussing performance, it is important to distinguish between the book's claims, practitioner anecdotes, and peer-reviewed evidence. The Complete Investing System provides a rules-based approach; academic validation depends on exact implementation details and sample periods, so results vary across studies.

Influence and Legacy

Impact on retail/institutional investing

The CAN SLIM framework influenced growth and momentum investors and helped popularize quantitative screening combined with technical timing. IBD's ratings and screens are direct descendants of the method. Many retail investors and advisors adopted its rules, and professional managers incorporated elements into momentum-tilted strategies.

Related methods and derivatives

Other growth and momentum systems borrow themes from CAN SLIM — combining earnings momentum with price momentum and supply-demand analysis. Hybrid strategies often add quantitative rules, risk controls and portfolio optimization while retaining the core idea: strong recent fundamental performance plus price leadership tends to precede large gains in favorable markets.

Controversies and Criticisms

Practical limitations

Implementing the Complete Investing System can be time-intensive, requiring daily chart review, up-to-date earnings data and quick execution. Small investors face relative disadvantages: limited data subscriptions, wider execution spreads, and potentially higher per-trade costs. Taxes and turnover can erode gross returns, and periods when growth strategies lag value strategies can be long and painful.

Interpretational and implementation disputes

Traders disagree on thresholds for EPS growth, what constitutes a valid base, and when to widen or tighten stop-loss rules. The book provides guidance but not a single "one-size-fits-all" recipe — practitioners adapt rules based on risk tolerances, account sizes and trading costs. This flexibility invites disagreement about the best way to implement CAN SLIM in different market environments.

Editions, Related Media and Resources

Editions and formats (print, ebook, audio)

Major editions include the original How to Make Money in Stocks and the expanded Complete Investing System edition. Formats include hardcover, paperback, ebook and audio. Libraries and catalog services list the Complete Investing System and prior editions for lending in various formats.

Official resources (Investor's Business Daily, training)

Investor's Business Daily provides proprietary ratings, screening tools and educational materials aligned with CAN SLIM principles. IBD publishes regular market commentary, industry group rankings and screens to help users identify potential candidates. There are also courses and workshops derived from O'Neil's methodology.

Further reading

Readers interested in the academic foundations and variations of momentum and growth investing may consult research on momentum returns, cross-sectional return predictors, and practical risk-management literature. Books on technical analysis and risk control complement the Complete Investing System for trade management and psychology.

See also

• Momentum investing
• Growth investing
• Technical analysis
• Stock screening
• Investor's Business Daily
• William J. O'Neil

References

• O'Neil, William J., The How to Make Money in Stocks: Complete Investing System (Complete Investing System edition). Refer to the edition for exact percent-stop rules and rule citations.
• Google Books preview and bibliographic listing (Complete Investing System edition).
• Amazon listings for the Complete Investing System edition and earlier editions.
• Goodreads bibliographic entry and reader summaries.
• YouTube audiobook/readings and summaries of the Complete Investing System.
• Library OverDrive entries and catalog records for the Complete Investing System.
• Investor's Business Daily materials describing IBD ratings and screening tools.

As of 2025-12-31, according to Amazon and Google Books listings and library catalogs, the Complete Investing System edition and associated IBD materials remain available in multiple formats and continue to be referenced in investor education.

External links and resources (by name)

• Investor's Business Daily (IBD) — proprietary ratings and screening tools
• Publisher pages for The How to Make Money in Stocks (Complete Investing System edition)
• Amazon and Google Books bibliographic entries (for edition details)
• Library OverDrive listings
• Public summaries and audiobook readings (platforms that host audio summaries)

Practical checklist: one-page CAN SLIM screening and trade checklist

• Confirm C: Current quarterly EPS growth meaningfully positive and accelerating vs prior quarters.
• Confirm A: Multi-year annual EPS and revenue growth with improving ROE.
• Confirm N: A new catalyst (product, management, market) or new price highs; evidence of fresh investor attention.
• Confirm S: Reasonable float/shares outstanding; no recent heavy dilution; buybacks acceptable.
• Confirm L: Top decile relative strength vs market and positive industry group performance.
• Confirm I: Evidence of institutional sponsorship or increasing fund interest.
• Confirm M: Broad market is in a confirmed uptrend or at least not in a bear trend.
• Chart confirmation: Valid base, pivot identified, buy zone defined, volume rising on breakout.
• Positioning and risk: Determine stop-loss (percent or pivot-based), position size limit per portfolio rules, and profit-taking thresholds.
• Post-trade monitoring: Watch for distribution days, failure to follow through, or fundamental deterioration; adjust stops.

Applying the system responsibly

The Complete Investing System provides a structured approach to identify high-growth, momentum stocks in U.S. equity markets. It is not a guarantee of results. The method requires data, discipline and time. Practitioners should test screens on historical data (being mindful of survivorship bias), adapt rules to personal constraints, and maintain clear risk-management procedures.

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Further exploration: read the Complete Investing System edition of the book, review IBD educational materials, and backtest your screening rules on clean data before deploying capital. To learn step-by-step screening templates and view example charts, consult the Complete Investing System edition and IBD resources named above.

Note: This article summarizes the book and method. It is informational and educational only; it does not provide personalized investment advice. For exact rule quotes and recommended percent stops, consult the referenced edition and official materials.