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NICOLAS DARVAS AND HIS $2,000,000

icolas Darvas viewed Wall Street as nothing more than a gambling casino; therefore, he set out to learn how to gamble.

I would like us to take a look at Mr. Darvas’ understanding of the stock market, as outlined in his best selling book How I Made $2,000,000 In The Stock Market, originally penned in 1960, as we recognize that what was true over 50 years ago still holds true today.  In other words, trading the market today is THE SAME AS IT EVER WAS.

Mr. Darvas experienced an “important turning point” in his stock market career when he learned that “there is no such thing as cannot in the market.  Any stock can do anything.”  With this in mind Darvas developed his “box theory” based on the following realizations:

1.  There is no sure thing in the market.  I was bound to be wrong half the time. Darvas adopted what he called the “quick-loss weapon”.  He already knew he would be wrong quite often (half the time); therefore, he decided to accept his mistakes realistically and get out of a losing trade with a small loss.  “This way, I figured, I would never sleep with a loss.  If any of my stocks went below the price I thought they should, I would not own them when I went to bed that night.  I knew that many times I would be stopped out for the sake of a point just to see my stock climb up immediately after.  But I realized that this was not so important as stopping the big losses.  Besides, I could always buy back the stock by paying a higher price.”

2.  My pride and my ego would have to be subdued.  Darvas surmised that with a win ratio of 50% his profits had to be bigger than his losses.  Breaking even was not a sustainable option.  For that to happen he would have to take many losses while letting the winners run.  Egotistical pride would have to give way to humble reality.  “As if stocks were made to conform to my new attitude, I handled this quite successfully for quite a while.  I bought with bold confidence when I thought I was right and coldly, without a hurt ego, I took my limited losses when I thought I was proven wrong.”

3.  I must become an impartial diagnostician. Instead of trying to force his will upon market direction, Darvas allowed the market to direct him by becoming intimate with a few stocks at a time and by not listening to others.  “To try to fit the market into a rigid pattern was a mistake.  As I only handled five to eight stocks at a time, I automatically separated them from the confusing, jungle-like movement of the hundreds of stocks surrounding them.  I was influenced by nothing but the price of my stocks.  I could not hear what people said, but I could see what they did.  It was like a poker game in which I could not hear the betting, but I could see all the cards.  Of course, the poker players would try to mislead me with words, and they would not show me their cards.  But if I did not listen to their words, and constantly watched their cards, I could guess what they were doing.”

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Hope is A Four Letter Word

Hope is a dirty word for  a trader ,not only in regards to procrastinating in a losing position ,hoping the market will come back ,but also  in terms of hoping for a reaction that will allow for a better entry in a missed trade.If such trades are good ,the hoped for reaction will not materialize until it is too late.Often the only way to enter such trades is to do so as soon as reasonable stop loss loss point can be identified.

Passion & Hope -Two Key Drivers

The two key drivers of success in any endeavor is passion and hope.

Passion creates the energy to do what we need to do to get to where we want to go. Many times money is just the side effect of the work we do driven by our own passion and desire for success with little thought given to the monetary reward that could happen during the battle for success. When we are passionate about something we just love doing it, we just love the game itself and everything about being in that game and playing it. True professionals do not use their bank account as a daily motivator to work, they are doing what they were born to do, they are just being who they are and what they are.

Hope is what gets us up in the morning and keeps us working toward our goals. Hope gives us the ability to do hard work today for a potential reward in the future. Hope sees an account at $0 and sees that it could be over a million dollars if the right plan is followed. Hope gives us the energy to work hard in our present circumstances believing that we are receiving an education that will show us the path to where we want to be. The greatest cause of depression is being realistic about the present and future and the loss of hope in tomorrow.
being better than today.  Know what you want, and understand how to get there. If you are willing to do what you have to do and be willing to pay the price that your goal costs you can have what you want.

“A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do.” 
― Bob Dylan