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Nicholas Darvas toured the world as a professional ballet dancer.
All the while reading hundreds of books on markets/trading.
He turned that knowledge into the famous Box Method and made $2M in stock market profits.
Here's how he did it ... https://macro-ops.com/how-i-made-2m-in-the-stock-market-a-book-review-darvas/
All the while reading hundreds of books on markets/trading.
He turned that knowledge into the famous Box Method and made $2M in stock market profits.
Here's how he did it ... https://macro-ops.com/how-i-made-2m-in-the-stock-market-a-book-review-darvas/
1/ Darvas' Early Days As A Losing Trader
Darvas did everything wrong as a beginning trader:
- Bought high and sold low
- Bought off "hot tips" from friends/family
- Turned his losing trades into "pet" investments
Lesson: Don't buy stocks based on hot-tips. Do you own work.
Darvas did everything wrong as a beginning trader:
- Bought high and sold low
- Bought off "hot tips" from friends/family
- Turned his losing trades into "pet" investments
Lesson: Don't buy stocks based on hot-tips. Do you own work.
2/ Darvas' First System: The Seven Rules
Tired of striking out, Darvas looked to something *real*, something *tangible* ... like a stock's fundamentals.
By focusing on the fundamentals, Darvas developed these Seven Rules for trading.
The big realization: "Study the fundies"
Tired of striking out, Darvas looked to something *real*, something *tangible* ... like a stock's fundamentals.
By focusing on the fundamentals, Darvas developed these Seven Rules for trading.
The big realization: "Study the fundies"
3/ Darvas' Date With Destruction
Using these rules, Darvas found (in his opinion) a *sure bet* stock. A company that couldn't *possibly* fall.
It met his criteria:
- Strong Industry
- Strong Rating
- 6% Div
- Low P/E
The result: He bet too big and lost a fortune!
Using these rules, Darvas found (in his opinion) a *sure bet* stock. A company that couldn't *possibly* fall.
It met his criteria:
- Strong Industry
- Strong Rating
- 6% Div
- Low P/E
The result: He bet too big and lost a fortune!
4/ Darvas' Secret: The Box Method
Despite the blow-up, one of Darvas' stocks did *really* well. In fact, it was a stock he didn't realize he had.
He bought it because the price was rising on strong volume.
It was then Darvas realized the power of price action and volume.
Despite the blow-up, one of Darvas' stocks did *really* well. In fact, it was a stock he didn't realize he had.
He bought it because the price was rising on strong volume.
It was then Darvas realized the power of price action and volume.
5/ Box Method Cont.
So what is this box method, you ask? It's simple:
- Wait for a stock to consolidate in a trading range ($12-$15, for ex.)
- Buy the stock on a breakout from that consolidation (I.e., box)
- Place a protective stop-loss below the low of the breakout bar
So what is this box method, you ask? It's simple:
- Wait for a stock to consolidate in a trading range ($12-$15, for ex.)
- Buy the stock on a breakout from that consolidation (I.e., box)
- Place a protective stop-loss below the low of the breakout bar
6/ Managing A "Box Method" Trade
Once in a trade, Darvas took an unemotional view to the stock.
If it traded back into a previous "box", he would cut his position.
If it traded up into new highs, he would trail his position with a protective stop-loss.
He kept it simple.
Once in a trade, Darvas took an unemotional view to the stock.
If it traded back into a previous "box", he would cut his position.
If it traded up into new highs, he would trail his position with a protective stop-loss.
He kept it simple.
7/ Box Method Examples
Here's a few examples of the Box Method in action.
Note some common characteristics:
- Horizontal support/resistance levels
- Clear consolidation
- Strong breakouts into new "Box" zones
- Winners never test prior box
(disc: I own shares in TOBII)
Here's a few examples of the Box Method in action.
Note some common characteristics:
- Horizontal support/resistance levels
- Clear consolidation
- Strong breakouts into new "Box" zones
- Winners never test prior box
(disc: I own shares in TOBII)
8/ Darvas' Final Form: Technicals + Fundies
Darvas' final trading strategy used both technicals AND fundamentals (O'Neils CANSLIM)
Here's how he did it:
- He looked for stocks with great price charts
- He bought breakouts if the company had strong earnings power & growth
Darvas' final trading strategy used both technicals AND fundamentals (O'Neils CANSLIM)
Here's how he did it:
- He looked for stocks with great price charts
- He bought breakouts if the company had strong earnings power & growth
9/ Darvas' Greatest Weapon: Distance From Wall Street
Despite his trading success with charts and fundamentals, Darvas' greatest weapon was his ability to stay away from Wall Street.
By touring the world he kept himself at a natural distance from the NOISE that dampens profits
Despite his trading success with charts and fundamentals, Darvas' greatest weapon was his ability to stay away from Wall Street.
By touring the world he kept himself at a natural distance from the NOISE that dampens profits
