Finally I bought it through a reseller on Amazon. The seller was in England and the book arrived in my mailbox a couple of weeks later. It was worth the wait! What adds to the books appeal is that, unlike Jesse Livermore, Darvas was not a professional investor. He was a professional dancer. He and his dance partner Julia entertained at nightclubs around the world.
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Finally I bought it through a reseller on Amazon. The seller was in England and the book arrived in my mailbox a couple of weeks later. It was worth the wait! What adds to the books appeal is that, unlike Jesse Livermore, Darvas was not a professional investor. He was a professional dancer.
He and his dance partner Julia entertained at nightclubs around the world. And because he was not a professional, he got his chops in the school of hard knocks.
He learned by doing. Darvas got involved in the stock market quite by accident. In he was offered a dancing gig in Toronto. The twin brothers who owned the club, Al and Harry Smith, made Darvas an unusual offer.
They wanted to pay him in shares of a Canadian junior mining company called Brilund. Darvas was a bit skeptical as he knew stocks went up and down in price. The Smiths agreed to make up the difference in cash if the stock dropped below 50 cents for the six months following the deal. Darvas agreed. As it turns out, Darvas could not keep his playdate and felt badly about letting the brothers down. His appetite, as they say, was whetted.
Then began the education. And he started losing money. So he quit the Canadian market and opened an account with a broker on Wall Street. His education continued. He followed broker tips. He subscribed to newsletters. He read books. He tried fundamental analysis. And he over-traded like crazy. When he found out about industry groups, he decided buying the strongest stock in the strongest industry was a good idea.
He held on believing it to be a temporary setback. He became afraid. I literally lived with my stock. I was watching it the way an anxious parent watches over his new-born child. And he went on to develop his own method of investing, a largely technical approach. He calls it the box theory and it works like this. He noticed that stocks fluctuate and stocks in an upwards trend will often pause and take a breather, fluctuating within a range.
A box he called it. And he noticed that when the stock broke out of this box to the upside, it tended to go up further. And if it broke out to the downside, the trend was often broken. If it broke through to 44, it would likely go lower. So he would buy at 51 and set a stop loss for the top of the last box or Darvas used very tight stops on his initial purchases. He reasoned that the stock had broken out of the box and it had no business going back in the box.
If it did, then he made a mistake and wanted to get out as quickly as possible with as little damage as possible.
He also looked to increased volume as a positive indicator. He was not averse to playing the same stock several times. For example, he played steel company Cooper-Bessemer three times between November and April In the fall of , a bear market developed but he had been stopped out of all his positions well ahead of it. His system had put him in cash when the market went south.
The individual stocks told him the story by their behavior. I just stayed on the sidelines and waited for better times to come.
He read the stock reports daily. He noticed some stocks gave ground grudgingly, fighting the down trend. Checking these stocks further, he discovered they were growing earnings.
This capital was following earning improvements as a dog follows a scent. Others were the idea of probing the market, that is buying a bit now, a bit more on confirmation and still more after that. In fact, like Livermore, Darvas was a plunger. He bought few stocks. After he made a million, he re-invested the proceeds in just two stocks!
And it reads like an adventure story, a compelling page turner. Get it!
Dancer[ edit ] Hungarian by birth, Darvas trained as an economist at the University of Budapest. Reluctant to remain in Hungary until either the Nazis or the Soviet Union took over, he fled in June at the age of 23 with a forged exit visa and fifty pounds sterling to Istanbul , Turkey. Sometime later, he met up with his half-sister Julia. The stocks continued to rise and he subsequently sold them at a profit. He would use cables and telegrams to send his buy and sell stop orders to his broker in New York City. From now on Darvas would select a stock when it made a good advance on strong volume, with favourable fundamental company research.
Nicolas Darvas Made $2,000,000 using Trend Following Methods
He bought few stocks. This way you can trade Forex, CFDs on stocks, indices, precious metals, oil, and other instruments on the financial markets. Learn more about Amazon Prime. If you have any interest in Trend Following, this is what made Nicolas so successful. As a part of a self imposed project to review 50 books in Finance, I read this book. Probably the most valuable lesson the trader can take from this book is the importance of a Trading Plan.
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