William O’Neil is one of the legends in investing world and a market wizard who founded the CANSLIM method.
Here are some of the principles that he used to outperform majority of investors which can help you elevate your swing/positional investing:
1. Cutting losses fast:-
One of his biggest principles was to cut losses as soon as possible.
"If a stock drops 7 percent below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation”
2. Not having any biases or opinions :-
His philosophy was to only focus on price action and fundamentals and cut out any other noise.
"Personal opinions are almost always worthless … facts and markets are far more reliable.”
3. Companies with good fundamentals:
He focused on companies with strong earnings growth. The importance of identifying companies that have consistently delivered strong earnings growth in their quarterly financial reports.
4. Using fundamentals and price action together:
He used fundamentals like EPS, Sales Growth etc. to identify a stock fundamentally and then buying when they break out of sound and proper bases with a set plan of how to manage if it goes against or goes with him.
5. Invest in leading companies:-
His principle is to always be in leaders of leading industries not in laggards.
“It seldom pays to invest in laggard stocks, even if they look tantalizingly cheap. Look for, and confine your purchases to, market leaders.”
6. Always have a set plan:
Always having a set plan about where to enter, how much is your SL and how are you gonna exit. You should have all of these before you enter a stock.
7. Doing your homework and putting in effort:-
Going through past historical charts of leaders and how they behaved teaches you about the craft of investing.
“90% of the people in the stock market, professionals and amateurs alike, simply haven’t done enough homework.”
8. Buying 52 week highs not lows:-
You want to buy a stock when it is breaking into new high ground not at 52 week lows.
“Majority of investors never buy this way & that’s why few will ever own the big stock winners.”
9. Staying disciplined :
The importance of staying disciplined and following your investment plan, even when the market is volatile or uncertain. This can help to prevent rash decisions based on fear or greed.