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Nicolas Darvas
By: Mark Crisp
Claim to Fame of Nicholas Darvas:
* Turned a $25,000 account into $2,25 million in just 18 months.
Wrote:
* "How I Made $2 Million in the Stock Market" and made another $2 million from
this.
* "Wall Street The Other Las Vegas"
* "You Can Still Make It In The Stock Market"
What I Like About Nicholas Darvas?
Where do I start? I consider Nicolas Darvas the BEST trader, or as he him-self
said "investor" in the world. I'll admit one man's poison is another man's
medicine. You cannot really define what is the world's BEST trader. It's my
opinion.
Why? You must, absolutely MUST, read, re-read, study and think about every line
in the book "How I Made $2 Million in the Stock Market". I won't lie when I say
I have read it over 100 times and I still read it at least once per month.
Amazingly I keep learning new points.
Darvas was actually the first CANSLIM trader without going into the finer
points. This may up-set William O'Neal followers. Whilst Darvas did not actually
study earnings, sectors, shares outstanding etc. his off the cuff stock
selection meant he was using CANSLIM methods. Don't forget this was way back in
the late 1950's.
He turned $25,000 into $2,25 million by scanning the newspapers in just five
minutes during the late, night early morning, period. He him-self said it wasn't
so much the amount of money he made that pleased him but the ease and peace of
mind it was achieved. It was SO easy. Admittedly, he was lucky in that he traded
his system during a roaring bull market. But his system makes money in all
market conditions. It's just a fact that you'll make a lot more during a
run-away bull market. That can be said for most systems.
The perfect attitude for trading. When he was wrong on a trade he shrugged his
shoulders, cut his losses and looked for the next one. No second guessing. No
emotion. No ego involved. He told the reporter who interviewed him for a time
magazine article he only expected to be correct half the time.
Without doubt his best quality was his ability to question everything. When he
was wrong why? What worked and why? What didn't work in the stock market and
why? Question everything and eliminate what doesn't work. He pieced together a
system that fitted his personality. The person who can do this will be a big
winner in the markets.
Flaws:
What flaws can the world's best trader have? Actually there is one and it was a
very dangerous one.
Money management. Boy was he lucky! Buying a 100% position on leverage on one
stock could have been the death of his account. When he bought 2,500 shares, on
margin, of E.L Bruce (a small cap un-known stock) IF things had have turned ugly
here, i.e. prices gapped down or fell off very sharply, no doubt Darvas would
have been finished. Instead of writing a book about how he made his fortune in
the Stock Market he might have written one about how a fortune was lost. Luckily
he made over $300,000 from this transaction alone. Had he have had some money
management rules in place, sure the gains would not have been as big, but at
least IF things hadn't have worked out he could live to fight another day.
A number of occasions Darvas "plunged" into the market with little thought to
money management and risk. Ignorance really was bliss. Jesse Livermore was not
quite so lucky.
Conclusion:
A shining light of hope to the man on the street that anyone given time,
education, desire and determination can make BIG money in the stock market. You
don't have to have state of the art technology, data, or in-side information to
make massive returns.
If Darvas can make $2,25 million by scanning the papers for five minutes before
bed what does that say for today's Hi-tech trading techniques?
His methods still work and always will work. If it stops so will the stock
market.
* * * * 1/2 41/2 Star Trader (P.S. there will never be a 5 star trader)
About the Author:
Mark Crisp is a keen student of Darvas's Methods and created the Momentum Stock Trading System: http://www.stressfreetrading.com |
