Talk:Nicolas Darvas

2022 random updates

Trying to clean this page up... I've finished all the edits that I can tonight, here's what I did:

• Removed an entire section to the Talk page, below
• Broke out his Author career and nested one of his books underneath that
• To-Do: add a section about his $2M book at the top of that section
• To-Do: any of his other books super famous? add them, too, under Author section
• Online tool to plot Nicolas Darvas boxes -- removed this link, was not working, check it again later

ARCHIVED FOR LATER USE: How Nicolas Darvas Made $ 2 Million From The Stock Market?

ed note: This section was originally on the article page, but upon review, it just... it isn't well-written and there are no sources. The whole thing was wonky and seemed out of place, so I'm moving it here and perhaps someone can help me edit it or clean it up some day. Nickgray (talk) 02:18, 3 May 2022 (UTC)

When Nicolas Darvas initially started trading in the market, he struggled a lot and made losses too. Later, after gaining experience he discovered his ‘Box Theory.’ He believed that the shares which move up and down the chart, move in a specific box pattern. Till the time the share is moving in a limited range, it is known as a box. When the share moves out of that limited range i.e. moves out of that box and increases along with increased volume then Nicholas added fundamentals to this technique and traded in such shares and he also made million dollars.

After making half a million dollars from the share market, Nicolas Darvas’s self-confidence was on Cloud-nine. He thought he had got hold of the share market. He felt as if his sixth sense had been activated. After traveling to various countries, by working just a few hours for analyzing and investing in the market, he made millions. So, now Nicolas thought he should put in extra effort in the share market to make more money and hence, he allotted his full-time in the market for trading, unlike earlier. Thus, he started focusing on day-trading.

By trading in the shares of E.L.Bruce company, he had earned around $ 1, 60,000 which he now decided to use it for day-trading. Here, we can learn one thing from this incident that is ‘Learn to re-invest your profits.’

Now, Nicolas had indulged himself completely in to day-trading. He simultaneously bought and sold shares within fractions of minutes. Nicolas carried on day-trading in the shares of various companies such as Rome Cables, American Motors, American Cables, Sharon Steel, Richards Chemicals, etc. and he suffered a huge loss of around $ 1, 00,000 in these trades.

Nicolas then thought to himself, how can a person like me who made millions from the market, suffer such a huge loss of $ 1, 00,000? So, when he analyzed the reason behind his loss, he found out that it was his ‘ears’ that were at fault, yes you read that right! Nicolas used to listen and react to every news that fell on his ears and simultaneously trade following such news. Hence, made such losses.

Earlier, while he used to travel various countries for performing dance shows and trade in the share market by being away from the market, he was still able to analyze the trend of the shares in the market successfully and so he’d earn good returns from the market as well.

Nicolas had now understood that ‘Trading only when there is an opportunity in the market will help him earn good returns, trading frequently will only lead to losses.’

While Nicolas was suffering losses because of day-trading, the only thing happening right for him at that time was, his earlier investments which he had made in Thiokol Chemical and Universal Control which were on delivery basis. Here, delivery-trading refers to holding a share until you get the right value for it.

Nicolas Darvas invested in the shares of Thiokol Chemical and Universal Control based upon his box theory when the shares indicated that they are moving out of the box i.e. moving out of the limited range. At that time, he traded in those shares by following the stop-loss and hence, made good returns. Despite the fact that he only analyzed these shares in the time apart from the time he was traveling across countries and performing, he was still able to make good profits. On the other hand, in day-trading where he allotted most of his time, he still had to face huge losses. So, from this scenario, we learn that ‘Too much analysis will lead to paralysis.’

There is too much volatility in day-trading. Thus, Nicolas understood that carrying out day-trading by analyzing the trend is too difficult a task. Where-as, in delivery-trading, by following his box technique, it was feasible for him to invest in shares here. So he now decided that he would not indulge in day-trading again. From this, we learn that ‘Making a mistake is acceptable, but repeating the same mistake is a blunder. So don’t repeat the same mistake, by mistake.’

Consider, if someone meets an accident and gets his hand fractured then for him to recover and get back to normal takes some time. Similarly, Nicolas Darvas took some time to recover from the mind-set of day-trading where he suffered huge losses.

If we are scared to get in the flight for the first time, we should make sure to take the next flight soon so that our self-confidence remains intact. This was well understood by Nicolas and so he decided to get back to delivery-trading by following his box theory.

By this time Nicolas had understood that day-trading isn’t his cup of tea and neither there are too many chances of being successful in day-trading. So, he once again made up his mind to get back to delivery-trading and hence, started reading market quotations after the market closed daily.

Now to regain his confidence in delivery-trading, Nicolas started making small-small trades in the market based upon his box theory. Here too, he earned some and he lost some. But because he followed the stop-loss, his loss was limited and the trades where he made a profit, he earned a good profit there.

Talking about Thiokol Chemical and Universal Control where his investments reaped good profits, he says, ‘When a share is in an uptrend, we should hold on to the share and not hurry to sell it off. If the share is in an uptrend, then we have a chance to make a good profit there. On the other hand, when the share indicates or gives a signal of moving in the downtrend, then we should sell it off early.’

Further, when the share Universal Control gave an indication of moving in the downtrend then there Nicolas booked his profit and sold off the share. He then re-invested this profit in the share of Texas Instruments which indicated moving out of the box i.e. moving out of the limited range according to his box theory. Similarly, when the share Thiokol Chemical gave an indication of moving in the downtrend then there Nicolas booked a profit of around $ 8 lakhs and sold the shares.

Now it was a risky affair to invest this huge profit in just a single share. Nicolas Darvas wanted to invest this profit in an up-trending share so as to increase his profit.

How did he do this? Do pay attention as we are revealing a very important secret here. So, Nicolas Darvas identified ‘four’ such shares who were earlier moving in a limited range, moving in a specific box. They had recently given a signal of an uptrend. Those four shares were namely, Zenith Radio, Beckman Instruments, Fairchild Camera and Litton Industries.

Nicolas Darvas didn’t invest the entire $ 8 lakhs in these shares. He just bought a few quantities of these shares. He divided around 23% of that $ 8 lakhs profit proportionately in these four shares respectively. Also, he maintained a stop-loss of 10% for each of these trades. Amongst these shares which would be the ones who would mostly be in an uptrend, only the shares would know. Later on Litton Instruments and Beckman Instruments both hit the set stop-loss.

As Nicolas had only bought a few shares and had set a stop-loss as well, so even though he went wrong in these trades, he did not incur too many losses. And the other two trades that proved right, Nicolas increased his investment in those two shares. It means he invested more in the trades where he was successful and cut his losses short in trades where he went wrong. The two trades Zenith Radio and Fairchild Camera where he was successful, he increased his investments there and thus made huge profits here.

So out of the four trades, Nicolas was successful in two trades and was unsuccessful in the other two trades, which means 50% of the times he was right and the rest 50% of the times he was wrong. Despite being right only 50% of the time, Nicolas still earned huge profits. This was possible because, wherever his trades went wrong he had maintained stop-losses and whenever his trades worked in his favor, he increased his investments there. In this way, Nicolas Darvas was able to increase his profits and cut short his losses.

Will try to add more or edit more soon. Nickgray (talk) 02:11, 3 May 2022 (UTC)

Untitled

Some sources on the net say that Darvas died in 1979. But in his last book "You can still make it in the market", you can read under "About the author" : "Before his death in 1977..."— Preceding unsigned comment added by 213.119.23.67 (talk • contribs)

Check out the comments on elitetrader [1]: "Not too long after Darvas's book was published, a public inquiry was instigated by Louis Lefkowitz, then US Attorney General. The purpose of the inquiry was to ascertain the validity of the claims made by Darvas, given the influence the book was exerting over what could be a dangerously gullible public. The investigation strongly indicated that the overall claim of the book could be totally fictitious. There seemed to be considerable falsification by omission. While Darvas proudly wrote of the profitable trades he had made, the investigation revealed a number of loss-making trades made by Darvas which never appeared in the book. If the loss-making trades made by Darvas - which never appeared in the book - were deducted from the profit-making trades - which did appear in the book - it was difficult to see how Darvas had made 2 million dollars in the stock market ... if he had made anything at all! Furthermore, the 'box system' which he claimed to have discovered bore a strong resemblance to a system advocated by the king of all speculators, Jesse Livermore, in his one and only book, The Livermore Key. One of the reasons that Livermore took his own life was the fact that the methods outlined in his book were no longer feasible in the United States following the introduction of the Securities and Exchange Commission and the imposition of various restrictions on share dealings. By the time How I Made Two Million Dollars in the Stock Market was published, people had forgotten all about Jesse Livermore. Livermore had become the anti-hero of a bygone era along with the Crash of '29. After studying the findings of the Darvas investigation the Attorney General launched a criminal action against him, alleging that certain statements he had made were fraudulent. Darvas's legal advisers countered with an action against the Attorney General and the United States for defamation of character. Lefkowitz decided the public interest would not he served by embarking on a long, tedious and complicated trial that was likely to give Darvas even more attention than he had already received. He therefore decided to drop the criminal action on condition that Darvas withdrew his action, giving an undertaking never to transact any type of securities dealings in the United States, or to become in any way involved in the US securities industry. Darvas agreed. He then left the United States to become an exile in Europe. Whether or not Darvas actually made 2 million dollars in the stock market has yet to he proved. It is a matter of public record, however, that he made several million dollars from the sale of his book. But by the time I met him in 1976 in the Dorchester Hotel in London, there was every indication that most of the royalties had been whittled away. There had certainly been no profitable share dealing using the `box system'. At the time, Darvas had very little to say about the stock market. By this time he was trying to make a personal comeback with a new book he was writing. It was called How to Be Your Own Doctor. We met on several occasions after that. The man fascinated me. l really wanted to know what made him tick! I've known several successful stock market operators over the years, all of whom shared certain characteristics. Darvas was a showman and a promoter of the highest order. But the qualities which comprise the successful stock market operator were nowhere to he found in my assessment of his character. A few months after our initial meeting Nicholas Darvas checked out of the Dorchester Hotel without leaving a forwarding address. It was to he several years before I heard the name again. The last occasion his name came up was the result of a telephone call 1 had from a firm of lawyers. It seems I have acquired a reputation as a central information bureau for every stock market operator coming in and out of London. The lawyers wanted to know if I could held them find Darvas. They had a bankruptcy petition against him. It was long overdue for service!"— Preceding unsigned comment added by Lucsecret (talk • contribs)

Story above

I have deleted the paragraph in the entry referencing the story above, as it appears rather anecdotal and not supported by authoritative evidence. —Preceding unsigned comment added by 203.18.241.226 (talk) 06:46, 8 July 2008 (UTC)

The non-profit Darvas box plotter to visualize his theory

I've been using it for years and it's a great public service about Nicolas Darvas' famous method. The link is Darvas Box Plotter and visualizes exactly what Nicolas Darvas talked about.— Preceding unsigned comment added by 69.230.210.143 (talk • contribs)

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Assessment comment

The comment(s) below were originally left at Talk:Nicolas Darvas/Comments, and are posted here for posterity. Following several discussions in past years, these subpages are now deprecated. The comments may be irrelevant or outdated; if so, please feel free to remove this section.

The book writen by Jesse Livermore is "How to Trade In Stocks" and not as mentioned by the author of this article. Also Darvas did provide a list of stocks that cost him loses during the 18 months when he made the 2 million. This was his first book - and the book that made him famous. Jesse Livermore and Nicholas Darvas's trading methods overlap - but they are not same. Both the traders proposed "pyramiding". For Darvas it was the only trading method, for Livermore it was just another trading method.

Last edited at 04:11, 15 February 2008 (UTC). Substituted at 01:14, 30 April 2016 (UTC)