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4.2 out of 5 stars
How I Made $2,000,000 in the Stock Market
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19 of 20 people found the following review helpful
on June 9, 2001
Format: Paperback
This book is recommended by William J. O'Neil and other authors of Investor's Business Daily...I thoroughly enjoyed Darvas' explanation of how he went through the process of learning to invest. Many features of his strategy are embodied in the method popularized by O'Neil in How To Make Money In Stocks. Darvas' gives the investor a way to decided when to buy or sell stocks without getting bogged down in a bunch of technical indicators. The old adage of "buy low, sell high" is greatly misused and misunderstood. The danger of following this idea is buying a stock when the company founders because the stock's price is low, usually having dropped 20-80% and having a low PE. Darvas didn't follow this strategy. He always checked out the financial strength of a company then waited for the stock price to move from a lower "box" (as defined by Darvas) to a higher box. This is similar to O'Neil's strategy of buying when a stock hits a new high, shucking weak investors. Darvas would hold a stock as long as it remained in the box or moved into a higher one. When the stock price faltered and began descending into the next lower box, he sold out.
One very special feature of Darvas' book that makes it so valuable is the recapitulation of each stock he bought on his way to making $2 million (and investor today would have to make at least 10 times as much to match Darvas). He shows his wins and losses and what he did to improve his technique.
Successfuly investing is not based on the nearly mindless, lazy approach of "buy and hold." One could have bought a Dow Blue Chip darling of Bethlehem Steel near its peak of $23 3/8 in Jan '94 and held it until today at $4, or worse bought it in 1983 near $30 and watched it meander down and up with lower lows and lower highs to the present. Clearly, buy and hold is not a good strategy unless one constantly reviews the fundamentals of the company.
Darvas' strategy is clearly a winning method that kept him in strong performing stocks and got him out of losers that other people hung onto for years, e.g., Coca Cola.
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16 of 17 people found the following review helpful
on January 27, 2006
Format: Paperback
This book follows Mr. Darvas' path from being a professional dancer to him becoming a successful investor using what he refers to as a "Techno-Fundementalist" method.

I found this book to be an informative introduction to the subject as well as rather entertaining. What I found to be especially compelling was how the book takes you through the evolution of this trading method. The mistakes made along the way have just as much value as the actual method itself. I very much recommend this book to anyone interested in the more mechanical techniques of investing.

The only real caution I would have to people who are interested in this book are as follows:

1)This book was written in the 60s. The stock market has changed considerably in that time. The concepts of the book are still applicable, however the market (especially the rules of the SEC) and situations that Mr. Darvas was investing in have changed.

2)Mr. Darvas lost over $100,000 dollars (in late 1950s dollars) before he made his riches. Furthermore, he made his 2,000,000 primarily through 4 or 5 stocks. Many of his trades actually netted him a loss. Please don't buy this book if you are looking for the magic bullet of investing. Like the title of this review says it is a good introduction. I would recommend further reading on the subject before you start using this method with your own hard earned dollars.
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23 of 26 people found the following review helpful
on November 21, 1999
Format: Paperback
I shunned this book 10 years ago because of its title and its use of margin. Following the recommendation of Investors Business Daily I bought the book and started reading it. The author's experience of trading stocks echoed with mine sentence by sentence and I was totally absorbed. I admired his relentless pursuit of how the stock market actually worked and he finally figured it all out to make two million dollars. To create tremendous wealth you must concentrate on the best acting stocks in the market and use trailing stop loss orders. I am glad the author, a dancer, was willing to share a secret that Wall Street pros will trash but who made $2 millions? The book has already doubled my net worth and whoever follow these words of wisdom will become the millionaire next door!
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18 of 20 people found the following review helpful
on February 16, 2003
Format: Paperback
Box break-out, originally posted November 6, 2001
When prices move out of a narrow trading range, this often leads to an extended move in the same direction as the break. The box-breakout technique works well on all securities including Spreads.
Darvas is a master at this technique and one of its best teachers. Simple and easy to read. The book was originally how he made $1,000,000.00. During the time it took to get it published they had to change the name.
Darvas was a traveler, he shows how even a nomad can catch every major move, using just prices and volume. Information anyone can easily get from the Internet anywhere in the world.
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10 of 10 people found the following review helpful
on August 7, 2005
Format: Paperback
Warren Buffet is richer, and Peter Lynch and George Soros are more well-known, but in terms of the capital gains he was able to make in a relatively short timespan (18 months), Nicolas Darvas is perhaps the greatest investor of all time.

That being said, this book shouldn't be taken at face value. It's very telling that the title is "How I Made 2 Million Dollars..." and not, "How YOU Can Make 2 Million Dollars." Neither this, nor any investing method should be trusted until you have had time to study it over time (I recommend developing an artificial portfolio over a period of several months, at least, using a spreadsheet and adjusting for commissions), and until you feel comfortable with it: Darvas' tales of his early losses should show just why that is the case. Another thing is that it is NOT based entirely on a price pattern in its methodology: Darvas was apparently blessed with some remarkable foresight into industries which had a high potential for future demand growth, which is what caused most of the spectacular upward trends he describes in the book. Unless you are able to analyze fundamental market characteristics in a similar manner, you may make some money, but you likely won't match his returns. He also noticed stocks that interested him by unusual surges in volume. Using Barron's or the Wall Street Journal, that would mean studying pages and pages of closing prices (with no charts) in order to qualitatively asses what the normal volume of a stock was...it sounds much more time-consuming than we might wish.

Still, the best thing that this book ever did for me was that it made me curious about what kind of profits a person could expect to make in the market. I decided to investigate this method (and I'm still doing that) to compare it against others, and hopefully it'll do the same for you.
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31 of 37 people found the following review helpful
on January 23, 2001
Format: Paperback
Supertrader David Ryan mentioned this title when I attended William O'Neils Workshop 9 yrs ago. I had to source it out with diffuculty shortly after that from some antique book store. Now that you are here reading this at Amazon, dont miss this goldmine. It allows you to get into the brain of a Supertader. Easy Reading.
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16 of 18 people found the following review helpful
on July 2, 2007
Format: Paperback
Nicolas Darvas wrote a very entertaining book. Maybe the fact that I'm half Hungarian added to the vicarious enjoyment. His early misadventures touched a raw nerve. His remarks about the high cost of trading in the bad old days reminded me of why I switched to an online broker. While reading the book I broke out in laughter several times.

I was so intrigued by the box model that I created a computer model to test it. The results were a disappointment. While I didn't test it with too many stocks, I ran the tests with growers like BLWD, AAPL, and CMG. Darvas stated that he invested in growth stocks even if he didn't call them that and I tried to mimic his style as closely as possible. To give an example, over a period of 18 month from Jan 2006 to June 2007, the model traded BWLD five times, two winners and three losers for a net gain of 11% over 18 months. Improving the stops might have increased the yield to around 16%. That's nothing to write home about. During that same period of time the Dow 30 advanced 16% (annualized percentages).

Some seven years ago I played around with another computer model based on crossing the various DMA lines. The stocks I used were the tech darlings of the bubble era. I used real price data from the '90s. The model made Warren Buffet look like a rank amateur, it was producing yields well in excess of 50% and it generated a very concentrated portfolio even when I fed it data for over 100 stocks. When I tested the same model in a bear market scenario it came out even, losing the trade commissions.

Why the long story? Because I'm trying to put Darvas' achievement in perspective. From Jan 1957 to Dec 1958 the Dow 30 yielded 24% annualized, about three times its long term average. Darvas used an enormous amount of leverage or margin, more than most of us can obtain today and certainly much more than I would ever be willing to risk. Darvas must have had very good income from his dancing to dare risk that much. He did keep is income and his investing funds separate. Darvas was also very astute in his stock picking. The Soviets launched Sputnik on October 4, 1957 and America was feverishly trying to catch up. Kennedy was a good speechmaker.

I believe that an extraordinary number of favorable circumstances came together in a very fortuitous way to enable Darvas to achieve his feat. From $25K to $2.25M in two years is an annualized return of 843%. As they say on TV, "Don't try this at home." :)
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15 of 17 people found the following review helpful
on December 5, 2001
Format: Paperback
The author's system is actually nothing new and is based on time-tested principles of trading/investing. Specifically, he looks for emerging growth companies in industries likely to lead the economy in the future that have strong earnings growth and have recently broken out of a "basing" pattern on high volume to new highs. After taking a position in these stocks, he uses trailing stop-loss orders to protect his capital. He never used charts, instead devising a system of "boxes" which are actually trading ranges. It is understandable that he did not use charts as he was traveling the world at a time when there was no Internet, computers or faxes, and therefore he had no access to such data. Now of course, anyone with a Internet connection can analyze a stock's patterns and all other pertinent information necessary to implement his system.
The one technique he uses that is not traditional is to take huge positions in the stocks he picks, which allowed him to make his two million in just a few series of trades. This of course is not exactly low-risk, even using stops. For example, if one had a 10,000 share position with a stop two points under the entry-level and got stopped out, you would still lose $20,000, not exactly chicken feed.
For those who wish to use his system, it is essentially the same as touted by William O'Neill and his Investor's Business Daily. That newspaper does the research on each stock's earnings history and other fundamental and technical indicators so that the individual reader is spared from that tedium.
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12 of 13 people found the following review helpful
on June 2, 2003
Format: Paperback
I doubt doing the things he actually did to make his money would work today. But thankfully he documents all the mistakes he made before hitting it big.
Those mistakes would still be mistakes likely to cost an investor a lot of money. What he got right is much less important than what he got wrong.
Study the errors!!
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8 of 8 people found the following review helpful
on May 9, 2005
Format: Paperback
As cheesey as the title sounds, I read the reviews of the book and decided to give it a day or two of my time to see if it had anything useful. The book was recommended to me by some very successful traders so I picked up a copy. I read investment books continuously trying to figure out the seemingly psychotic behavior of the stock market. I was very pleasantly surprised by this book. This author, even though writing about experiences 50 years ago, had a fantastic review of his trading. I was riveted by each page because he went thru what I went thru when I started out trading. His conclusions were right on and his trading style works. It isn't anything fancy but basically states what it took me 20 years of trading to conclude. The good news for me is I am doing basically what he did and I am successful in this choppy market. All in all, a GREAT BOOK.
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