Nicolas Darvas

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Nicolas Darvas (1920–1977) was a world famous dancer, self-taught investor and well-known author.

Escape from Hungary[edit]

Hungarian by birth, Nicolas Darvas trained as an economist at the University of Budapest. Reluctant to remain in Hungary until either the Nazis or the Soviets took over, he fled in June 1943 at the age of 23 with a forged exit visa and fifty pounds sterling to stave off hunger in Istanbul, Turkey. Sometime later, he met up with Julia (his half-sister) who became his partner in a dancing team that was to become one of the most successful acts in Europe and the United States.[1]

In April 1953 Darvas and Julia appeared with Judy Garland and Bob Hope. By 1956, Darvas and Julia were touring the world. Picture of Julia Picture of Nicolas Darvas

Books read off hours[edit]

During his off hours as a dancer, he had read some 200 books on the market and the great speculators, spent eight hours a day until saturated.[2] He began his studies by reading the following:[3]

  • ABC of Investing, by R. C. Effinger.
  • The Stock Market, by Dice & Eiteman.
  • The Securities Market: And How It Works, by B. E. Schultz.
  • Your Investments, by Leo Barnes.
  • Profit In The Stock Market, by H. M. Gartley.
  • Consistent Profits In The Stock Market, by Curtis Dahl.
  • You Can Make Money In The Stock Market, by E. J. Mann.

His top 2 books which he had read almost every week were:[4]

  • The Battle for Investment Survival, by Gerald M. Loeb. Published in 1935.
  • Tape Reading and Market Tactics, by Humphrey Bancroft Neill. Published in 1931.

Darvas profits[edit]

Darvas ploughed his money into a couple of stocks that had been hitting their all time high. He was utterly surprised that the stocks continued to rise and subsequently sold them to make a rare profit.

Darvas decided to regroup to assess this remarkable occurrence. And it was here that Darvas came up with this approach and plan for trading stocks that was to see him achieve $2,450,000.00 fortune in just 18 months, during the 1957-58 bull market. In total, just 7 long years since his first trade.[5]

Darvas success was in large part due to the strength of the market during that time. From the week ending 12/16/1957 through the week ending 7/27/1959, the S&P 500 rose over 53%. Market moves of that size are extremely rare and have only happened 7 times since 1950 according to Yahoo Finance weekly S&P 500 prices. An old adage is to "Never confuse brains with a bull Market".

His main source of stock selection was from Barron's Magazine.[2] The magazine was usually a week old edition since he was traveling throughout the world performing his dance troupe. He would use cables and telegrams to send his buy and sell stop orders to his broker in New York. From now on Darvas would select a stock when it made a good advance on strong volume, with favourable fundamental company research.[2]

This method also showed Darvas insights into a stock's price behaviour, often revealing the signs of ‘inside buying’ before a company's release of favourable news to the public.

His famous stock selection method was called "BOX theory". He considered a stock price wave as a series of boxes. When the stock price was confined in a box, he waited. He bought when the price rose out of the box. He simultaneously set a stop-loss just under this trade price.

Time magazine[edit]

At the age of 39, after accumulating his fortune and also being exposed in Time magazine,[4] Darvas was to document his actions in the book, How I Made 2,000,000 in the Stock Market. The book describes his unique "Box System", which he used to buy and sell stocks.

Attorney general[edit]

Time magazine[6] subsequently reported that the New York Attorney General had 'thrown the book' at Darvas charging that his story was 'unqualifiedly false' and that it could find 'ascertainable' profits of only $216,000. The action was the first to be taken under a broadened state law that banned fraud or misrepresentation in giving investment advice.

In a follow up, dated 13 January 1961 Time reported that the probe was blocked by the court, which ruled that the investigation by Attorney General Louis J Lefkowitz was an 'unwarranted invasion of the free press'.

Time also reported that state investigators admitted that they had not been able to track down all of the dancer's brokerage accounts.

Darvas called the charges false, a "cynically irresponsible action, book burning by publicity".[7]

Bear markets and selling short[edit]

He stated, "I keep out in a bear market and leave such exceptional stocks to those who don't mind risking their money against the market trend".[8]

Darvas never sold short. As he states, "I have never done it myself because psychologically I am not cut out for short selling. But I think markets have now changed their character so much that all experienced investors should seriously consider it. It is not for the proverbial widows and orphans, though." [9] He realized that his system could easily be adapted to short selling.

Success formula[edit]

In his third book, he states "Later, I went on to explore and become successful in other fields, the fashion industry, theatrical producing, real estate are just a few". Here he claims "the formula for success remains essentially the same". In the book he illustrates, "the rules to be followed".[10] "But one must know the correct route".[11] In his last book, You Can Still Make It In the Market,.[12] Darvas gives the rules for a method called Dar-Card.

Death[edit]

Nicolas Darvas died in 1977.[13]

Complete books written by Darvas[edit]

  • How I Made 2,000,000 in the Stock Market. Published in 1960 (hardcover). Available in French : "Comment j'ai gagné 2.000.000$ en Bourse" (softcover).
  • Wall Street: The Other Las Vegas. Published in 1964 (hardcover).
  • The Anatomy of Success. Published in 1965 (hardcover).**
  • The Darvas System for Over-The-Counter Profits. Published in 1971 (hardcover).**
  • You Can Still Make It in the Market. Published in 1977 (hardcover) **. Republished on August 20, 2008; ISBN 0-9820556-7-6, ISBN 978-0-9820556-7-0

** Out of print.

See also[edit]

References[edit]

  1. ^ The Darvas System for Over-The-Counter Profits. 1971. back cover. 
  2. ^ a b c Time magazine. May 25, 1959. p. 85. 
  3. ^ How I Made 2,000,000 in the Stock Market. 1960. chapter 2, p. 26. 
  4. ^ a b Time magazine. May 25, 1959. pp. 84–85. 
  5. ^ Wall Street: The Other Las Vegas. 1971. Chapter 1. 
  6. ^ Time magazine. December 19, 1960. p. 79. 
  7. ^ [1]
  8. ^ You Can Still Make It in the Market. 1977. p. 126. 
  9. ^ You Can Still Make It in the Market. 1977. p. 89. 
  10. ^ The Anatomy of Success. 1965. pp. xiv–xv. 
  11. ^ The Anatomy of Success. 1965. p. xxvii. 
  12. ^ You Can Still Make It In the Market. 1977. p. 11. 
  13. ^ You Can Still Make it in The Market(softcover). 1978. About the author. 

Books referencing Darvas[edit]

  • How I Made Money Using the Nicolas Darvas System, by Steve Burns (August 17, 2010)
  • Lessons from the Greatest Stock Traders of All Time, by John Boik (May 21, 2004)
  • How Legendary Traders Made Millions, by John Boik (March 23, 2006)
  • Mastering the Trade by John F. Carter (Dec 7, 2005)
  • New York City Vaudeville (NY) (Images of America), by Anthony Slide (Jul 26, 2006)
  • How to Make the Stock Market Make Money for You, by Ted Warren (Dec 1994)
  • The Best: TradingMarkets.com Conversations With Top Traders, by Kevin N Marder (Sep 15, 2000)
  • The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance, by Joel Seligman (Jun 26, 2003)
  • Protecting Your Wealth in Good Times and Bad, by Richard A. Ferri (April 18, 2003)
  • Sixties Going on Seventies (Perspectives on the Sixties), by Nora Sayre (May 1996)
  • Trend Trading: A Seven-step Approach to Success (Guppy Trading), by Daryl Guppy (May 28, 2004)
  • The Astute Investor (Second Edition), by Eric L. Prentis (Mar 27, 2006)
  • The Perfect Speculator, by Brad Koteshwar (Jun 30, 2005)
  • Swing Trading for Dummies, by Omar Bassal (2008)

External links[edit]