By studying the traits of the most explosive stocks over the past 50 years, William J. O'Neil discovered 7 characteristics commonly found in the big winners. He created an acronym called "CAN SLIM" for these characteristics published in his best-selling investment book, How to Make Money in Stocks: A Winning System in Good Times and Bad.

C — Current earnings per share and quarterly sales should be up and in many cases accelerating in recent quarters.

A — Annual earnings should be up in each of the last three years.

N — A company should have a new product or service that’s fueling earnings growth. The stock should be emerging from proper chart pattern and about to make a new high in price.

S — Supply and demand. Shares outstanding should be larger and trading volume should be big as the stock price increases.

L — Leader or laggard? Buy the leading stock in a leading industry.

I — Institutional ownership by mutual funds in recent quarters should be increasing.

M — The market should be in a confirmed up trend since three out of four stocks follow the market’s overall trend. Declining markets under certain conditions may warrant increasing cash positions. We call this strategy "Cash Scaling," and you can read more about it here.