“William O’Neil was Ryan’s idol. After graduating college in 1982, he decided to try to get a job at O’Neil’s Company. He told the receptionist of his interest in O’Neil’s work and his willingness to accept any job, no matter how menial, just to get his foot in the door. He was even willing to work for free. Ryan was hired, and within four years, his investment success led to his appointment as the youngest vice-president of the company, with responsibilities as a portfolio manager and as O’Neil’s direct assistant in stock selection or institutional clients” – Jack Schwager
That excerpt from Market Wizards is a long, drawn out way to say that David Ryan is living my dream. He did it. While some people might get jealous reading about someone else doing something that they would love to do, I found myself inspired. David Ryan is proof that it is possible to study O’Neil’s work, learn from it, apply it, and make a career out of it. It can be done.
As I read through this interview, I found myself highlighting almost everything Ryan said. Much like O’Neil, it seemed as though there was intense knowledge oozing from every word he spoke. There were three key points that really stood out to me:
1. “All those books are good, but you learn the most from the market itself.” – David Ryan
What really struck me about this comment was that it followed a long list of books that Ryan recommended. He isn’t downplaying the importance of reading the books, but he is emphasizing how extremely important it is to gain actual trading experience. He goes on to talk about how vital it is to keep a trading journal documenting all of your reasons for buying a stock.
I have found this advice to be particularly useful in terms of this blog. It is easy to simply read a book or look at where the Nasdaq closed yesterday. It is another thing to highlight or underline a book or track the Nasdaq closes everyday for a few months. This blog ads a whole other level in that it takes a great deal more understanding and retention to be able to write about a topic. This blog is forcing me to analyze my trades and then explain them.
2. “I pick those stocks that have all the characteristics plus a great-looking base pattern.” – David Ryan
It was interesting to me that Ryan added almost nothing of his own to O’Neil’s CANSLIM system. If I didn’t know differently, I would have thought that this was an interview with O’Neil. It is very encouraging to read about people who have taken this CANSLIM system and achieved tremendous returns with it.
I think the reason this had such an impact on me is that I am constantly surrounded by people who have little knowledge of the market, do zero research, yet jump at the chance to give me their opinions on what stocks to buy usually based on a distant relative that used to work there. This is frustrating because I sometimes feel as if I am the only one who is genuinely trying to follow this CANSLIM strategy, therefore it is refreshing to find someone else who has done it.
3. “If it reenters its base, I have a rule to cut at least 50 percent of the position.” – David Ryan
I like this rule a lot. Over the course of my poor trading this summer, I found myself holding stocks that had fallen back into their bases and I was just waiting for them to hit my 7% stop-loss. I need to remember that if I follow the CANSLIM process correctly, I should have a profit from day one.
With David Ryan we once again see a trader who uses a specific system, applied a strict loss cutting policy, and has the passionate discipline to stick with that system. These three points appear to be at the core of every great trader and while I have the loss cutting part down, I am not sure that I fully understand my system or have the discipline to stick to it. These are the areas where I need to improve.