My favorite Nicolas Darvas quotes from the book on the subject of:
Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.”
Technical Analysis versus Predictions
“I believe in analysis and not forecasting.”
Trading Psychology
“I became over-confident, and that is the most dangerous state of mind anyone can develop in the stock market.”
Risk Management
“I decided never again to risk more money than I could afford to lose without ruining myself.”
Fundamental Analysis
“All a company report and balance sheet can tell you is the past and the present. They cannot tell future.”
Trend Following
“I made up my mind to buy high and sell higher.”
The Market tells its own story best
I accepted everything for what it was-not what I wanted it to be.”
Archives of “nicolas darvas” tag
rss20 Thoughts from -Richard Love’s “Superperformance Stocks”
If you read Jesse Livermore’s “How to Trade in Stocks” from 1940, Nicolas Darvas’s ‘How I made 2M in the stock market” from 1960, Richard Love’s “Superperformance Stocks” from 1977, William O’Neil’s early version of “How to make money in stocks” from the 1990s or Howard Lindzon’s “The Wallstrip Edge” from 2008, you will realize that after so many years, the main thing that has changed in the market is the names of the winning stocks. Everything else important – the catalysts, the cyclicality in sentiment, has remained the same.
Here are some incredible insights from Richard Love’s book ‘Superperformance Stocks’. In his eyes, a superperformance stock is one that has at least tripled within a two-year period.
1. The first consideration in buying stock is safety.
Safety is derived more from the good timing of the purchase and less from the financial strength of the company. The stocks of the nation’s largest and strongest corporations have dropped drastically during general stock market declines.
The best time to buy most stocks is when the market looks like a disaster. It is then that the risk is lowest and the potential rewards are highest.
2. All stocks are price-cyclical
For many years certain stocks have been considered to be cyclical; that is, the business of those companies rose and fell with the business cycle. It was also assumed that some industries and certain companies were noncyclical— little affected by the changes in business conditions. The attitude developed among investors that cyclical industries were to be avoided and that others, such as established growth companies, were to be favored. To a certain extent this artificial division of companies into cyclical and noncyclical has been deceptive because although the earnings of some companies might be little affected by the business cycle the price of the stock is often as cyclical as that of companies strongly affected by the business cycle. Virtually all stocks are price-cyclical. Stocks that are not earnings-cyclical often have higher price/earnings ratios, and thus are susceptible to reactions when the primary trend of the market begins to decline. This can occur even during a period of increasing earnings. (more…)
A Lesson on the "As if " Principle
In the 1880s, the psychologist William James developed and began teaching his “As If” principle of life. This might not make any sense to some of you, but it works. For example, if you want to be courageous, try to act courageously. If you want to be a nice guy, start putting a smile on your face and be friendly. If you want to be a great trader, then think like the great traders before us. You cannot be a great trader without first thinking that you are one. You get it?
A person that constantly thinks that he or she will fail in trading, cannot learn how to trade, or just simply has feelings that he or she will “never make it”, will inevitably fail. Think, act, and be like Jesse Livermore, Bernard Baruch, Nicolas Darvas, Gerald Loeb, Richard Wyckoff, William O’Neil, Jim Roppel, Steve Cohen, and many, many others. They play (played) to win and that’s how you should play: play to win. (more…)
Nicolas Darvas on stops: "no loss-free Nirvana"
I was just rereading Nicolas Darvas’ How I Made $2,000,000 in the Stock Market and came across this interesting summary of his trading method and risk management approach in the author’s intro. I’d like to share it with you.
Quoth Darvas:
“I built a fortune with serenity by avoiding premature selling yet making an exodus from most of my stocks with the use of a single tool: the trailing stop-loss.
I have discovered no loss-free Nirvana. But I have been able to limit my losses to less than 10 percent wherever possible. My stop loss method had two effects. It got me out of the wrong stock and into the right one.”
Full passage in the image below:
