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Nicolas Darvas-His Secrets to Success in the Stock Market

January 22nd, 2011

Nicolas Darvas-His Secrets to Success in the Stock Market

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Nicolas Darvas-His Secrets to Success in the Stock Market

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Home Page > Finance > Investing > Nicolas Darvas-His Secrets to Success in the Stock Market

Nicolas Darvas-His Secrets to Success in the Stock Market

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Posted: Sep 07, 2010 |Comments: 0
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Nicolas Darvas was born in Hungary. Darvas studied economics at the university of Budapest. At the age of 23, he fled Hungary during World War II. Eventually, he met up with his half-sister, who became his dancing partner. The team became one of the most successful acts in Europe, and the United States.

Darvas first became interested in the stock market in 1952. Like all beginners, he made a lot of mistakes, and lost money. He then realized that proper trading knowledge and experience are the keys to success in the stock market. Ultimately, he read over 200 books about trading the markets. His two favorite books were, “Tape Reading and Market Tactics”, by Humphrey Neill, and “The Battle for Investment Survival”, by Gerald Loeb. He basically read both of these books every week for a long time. This is how you become successful. Study, learn, and then implement, proper trading knowledge.

Between 1956 and 1958, Darvas turned ,000 into over ,000,000. He implemented a successful method, which fit his personality. This is very important.

Basically, Darvas looked for stocks that made a big advance, on much heavier than normal volume. He was a technical analyst, who bought when the big institutional buyers entered the market. He knew at this point, buyers were in control.

Darvas developed, “The Box Theory”. The keys to this method included, searching for high volume increases as a stock moved higher in price. He especially liked the smaller issues, which typically moved faster. He would use a box to establish a price range. He would only buy if the stock broke through the top of the box on a major increase in volume.

I’m going to give you a basic idea of the method that Darvas used so successfully. Here is a step by step analysis of an actual stock he made a nice profit with. There will be some vital stock market knowledge displayed, as we go through this process.

In late 1957, Darvas noticed in Barron’s, a stock called Lorillard. All he knew at the time was this stock showed a lot of strength, in a really bad market environment. It rose from 17 a share, and then established itself in a narrow box of 24 to 27 a share. During the rise, volume was much heavier than normal. This indicated to Darvas, there was a great interest in this stock. Darvas would buy if the stock went above 27 on heavy volume. This is exactly what happened and Darvas bought. He would then set a stop-loss order, 10% below the buy point. This is good money management. Always keep any potential losses small. This is a key to success in the stock market. Darvas held on to the stock until the price and volume action told him to sell. Darvas made a nice profit. Please note that Darvas would normally only buy a stock, when the general market direction was in a confirmed uptrend. I only make new stock purchases when the general market is bullish. This is because about 75% of all stocks follow the general market trend. You always want to put as many factors as possible in your favor, before taking a position in the market.

Darvas proves you do not need sophisticated software, or a number of technical indicators to make a fortune in the stock market. He implemented solid price and volume analysis. You need a successful method, and sound money management. These are the winning elements used by Darvas.

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Gary E Kerkow -
About the Author:

Hi, I’m Gary E Kerkow, founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. I have over 20 years of trading experience including stocks, futures and options. I implement the strategies, methods, and psychology of the world’s best traders and investors. This includes Jesse Livermore, William J O’Neil and others. Visit my website at http://www.tradingmarkets4u.com

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nicolas darvas, darvas, stock market, stock

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Nicolas Darvas-His Secrets to Success in the Stock Market

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