A brilliant investor, and one of the first traders to use technical analysis, Nicolas Darvas, at the height of his fortune, made 2.2 million dollars. If Darvas had invested today, that 2.2 million would be 20 million!

Before Darvas arrived in America he was studying economics at the University of Budapest. In1951, he immigrated to the United States, where he trained with his half-sister, Julia, to be a ballroom dancer. And he was a very good dancer, touring the world by 1956. He started investing in 1952, a ballroom dancer who had never invested in the stock market. But a Toronto nightclub couldn`t pay him in cash, so they paid him with three thousand shares of a Canadian mining company called Brilund. Two months later, the stock tripled and Darvas made a tidy profit. An investor was born.

Like any person beginning to trade on the stock market, Darvas made his mistakes. When he started out, many of his trades were gambles. He would pick companies that were the next big thing, or that came recommended by other traders. Many of his first large trades resulted in a huge losses. But cheered on by whatever small profits he did make, Darvas began asking questions about why stocks behaved the way they did.

Figuring out that even experts couldn`t predict the market, Darvas decided that he needed to acquire his own understanding. He began devouring newsletters, books, tip sheets, “hot tips”, and so-called insider information, in his quest to understand the market. Yet, despite his arsenal of knowledge, Darvas continued to lose money. In 1955, he purchased over fifty thousand dollars worth of a company called Jones and Laughlin. Jones and Laughlin had an excellent price to earnings ratio, high dividends, and was in a strong industry group. He was so confident in his analysis, that he bought most of this stock on margin. Then Jones and Laughlin began to fall.

In a desperate attempt to recoup his losses Darvas bought a stock he knew virtually nothing about. Jones and Laughlin`s price fell far enough to account for a $9,000 loss. Soon it had risen to a point where he regained about half of his losses. At this point in his career, Darvas was frustrated with his attempts at analyzing stocks. With Jones and Laughlin, he had put a value on the stock and expected the price of the stock to behave as he expected. When the stock price fell instead of climbing as expected, Darvas finally accepted that his method wasn`t working. He decided there wasn`t much worth in analyzing stocks by trying to assess their value. Annoyed with information from tip sheets, friends, so called experts, and even Wall Street maxims, he decided to shun most of these common sources.

In 1956 Darvas went on a two-year tour of the world to showcase his ballroom dancing. During this time he developed his famed Darvas Box method of screening stocks. Wanting to keep up on his holdings in stock he already owned and always on the lookout for new stocks, Darvas looked for ways to get American stock quotes while he traveled. This was a daunting task, but arrangements were made to obtain a copy of Barron`s or the Wall Street Journal through United States Embassies, and Brokers wired time sensitive information when needed.

Without brokers, friends, or other investors to influence him, Darvas developed a method of picking stocks based solely on the stock`s price and volume. By the time he returned to New York in 1959 he had made about $500,000. After Darvas returned to New York, people who were amazed with his success began to give him “hot tips” and stock advice again. Darvas listened to them, and took huge losses on the fortune he had made.

Knowing that it was the human element in stock trading that was his downfall, Darvas sequestered himself in Paris in February of 1959. He made arrangements with his brokers to make all his trades via wire and get the day`s highs, lows and closing prices. Using very little data, and a lot of intelligence and discipline, Darvas refined his Box method of picking stocks. Within six months, he had turned a profit of two million dollars.

Nicholas Darvas is regarded as one of the best traders in the history of the market. Many software firms are developing programs that make the exact same observations and decisions that Darvas made as he watched stock prices and volume. Darvas Boxes are used today and are the subject of analysis for financial researchers. His method is complicated and difficult to master, but it has been rigorously tested by those in the business and has been found to be one of the best methods out there.

Learn more about Nicholas Darvas. Visit www.nicolasdarvastrading.com today.

Introducing a couple of additional advanced Nicolas Darvas entry tactics that a trader might use when trading the Modern Darvas method. Now in my opinion these two additions are contrary to the original Darvas’ methodology, that said keeping in mind this course is the definitive guide to Nicolas Darvas trading, I felt it necessary to include them.

The two additional tactics are the aggressive entry and the delayed entry. Each entry tactic is suited to different types of traders and trading situations.

When trying to choose which entry tactic to use, it is best to consider the situation. For example, suppose a trader finds a stock that has already formed several Darvas boxes. An aggressive entry into the stock might be more beneficial and profitable, than a classic entry. The classic Nicolas Darvas entry tactic is to buy as soon as the stock price breaks out of the current Darvas box, and the Modern method is to buy the day after the stock closes above the Darvas box. Both of these methods would cause a trader to lose a portion of the profits in this situation. The alternative Nicolas Darvas entry tactics exist to allow traders to enter into a trend in such a way that the trend yields more profit.

Aggressive entry occurs when a trader buys a stock before it has broken out of its Darvas box. The trader buys in anticipation of the stock breaking out of its box. Buying before the breakout is risky because there is no assurance that the stock will actually break out of its Darvas box. The trader is making a guess that it will. The advantage to buying before the breakout is that the entry price will be closer to the stop-loss order.

Another consequence of buying before the breakout is that a trader can possibly capture more profit from the beginning of the trend. However, in today’s volatile markets, a stock is almost as likely to plummet as to rise. Buying before the breakout puts the entry price closer to the stop-loss order. Should the stock plummet, the trader will lose less money.

On the other hand, delayed entry is when a trader will not buy on or directly after the breakout, but will wait for the price to come back down. In a trend where a stock is just starting to form Darvas boxes, this tactic can increase the amount of profit. Instead of buying on a high, the trader will buy on a low, most likely one of the lows used to form the next Darvas box. This entry point is closer to the stop-loss order set by the previous valid Darvas box and minimizes any loss should the trend fail.

Learn more about Nicholas Darvas. Visit www.nicolasdarvastrading.com today.