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How I Made $2,000,000 in the Stock Market Paperback – September 8, 2011
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How did a world-famous dancer with no knowledge of the stock market, or of finance in general, make 2 million dollars in the stock market in 18 months starting with only $10,000? Darvas is legendary, and with good reason. Find out why.
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About the Author
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 at the age of 23 with a forged exit visa and fifty pounds sterling to stave off hunger in Istanbul, Turkey. During his off hours as a dancer, he read some 200 books on the market and the great speculators, spending as much as eight hours a day studying. Darvas invested his money into a couple of stocks that had been hitting their 52-week high. He was utterly surprised that the stocks continued to rise and subsequently sold them to make a large profit. His main source of stock selection was Barron's Magazine. At the age of 39, after accumulating his fortune, Darvas documented his techniques 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. Darvas' book remains a classic stock market text to this day. --This text refers to an out of print or unavailable edition of this title.
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Top Customer Reviews
1. It's very readable.
The author describes his investing style as a narrative. It takes you through his investing evolution step-by-step, detailing his actual experiences. This made it very easy to follow, and also more real.
2. It emphasizes both technical and fundamental criteria.
This is critical to good investing. Both areas tell a story. This is the best book I've seen that details an investors journey through to discover that both matter, and integrate the two pictures.
3. It makes for a better system, in some ways, than Investor's Business Daily.
I noticed other reviews that noted the similarity between IBD and Darvas. While they are similar styles, there are some key differences. First, Darvas looks for companies that have a good high-growth STORY, but does not necessarily require the company to have high-growth earnings. He doesn't look at ROI, earnings growth rate, etc. (at least not in this book)
The potential advantage of this approach over IBD is that sometimes stock prices reflect earnings potential BEFORE actual earnings show up. Alternatively, sometimes stock prices reflect perceived earnings declines BEFORE the actual decline in earnings.
4. His system makes sense from a technical standpoint, but is actually harder to do than you might think.
I like his system because it's technically sound. For example, it emphasizes taking small losses and being patient for large gains (among many other things).
Don't be fooled, however . . . it's trickier to follow that you think. Not because his system doesn't work, but because it requires a lot more discipline that you might imagine.
In his main year of gains, he records investing in only a few stocks. Also, he waits for a bull market. How many of us are really patient enough to do these two things. In reality, not many. It's just very difficult in practice.
Also, he keeps an investing journal, something which I still struggle to do, but which is essential for growth. Most people can't do this on a daily basis.
In all, it's a great book for the average investor to read and reread. I highly recommend it.
It is a hilarious, amusing story and you enjoy reading it till the very end, when you suddenly come to realize you must have had missed something. This book gives you very little factual knowledge about the Darvas system. In fact, the author had to attach an explanatory appendix to the end of the book, trying to clarify some quite fuzzy concepts (AND referring to his second book!). Reading the rest of the reviews here reveals that many reviewers read this second book from the author that attempted to further clarify the method.
But what is the method? Volume action? Price action? It is a "techno-fundamentalist approach", without any further explanation of what fundamentals are actually considered. (He refers a lot to reading this and that in Barron's...but what?) What is an "Expensive-but-cheap, high velocity stock"? And what is really "techno" about it? His "boxes"? You never figure out how he picked the successful stocks to begin with ("It began to emerge from the swamp of sinking stocks like a beacon...I was watching another stock whose action was fascinating to me...") Then, let's not forget that the author never fully explained his so called "feel" for some stocks and his "mental charting" technic. Well, try to emulate that one! A little additional clarification of this instead of the 10 pages of (worthless) telegraph copies and those 7 extra, empty pages could have gone a long way.
Overall, this book is an entertaining read. And yes, the author was a real person, 39 years old at the time of his interview in the May 25, 1959 issue of Time Magazine. As far as classic, that title I would reserve for a book like "Winning on Wall Street" from Martin Zweig.
What I found most interesting were the seven years leading up to the point where Mr. Darvas struggled to find a system that worked for him. He stopped asking others for tips and advice. He stopped listening to the hype coming from Wall Street, and the media. He went against conventional investing wisdom. He quit studying the fundamentals. As none of these things provided Darvas with much success.
I was also surprised at how disciplined Darvas was at using stops, and cutting a losing position quickly. From the beginning Darvas did this. Taking a loss is something very hard for most traders / investors to do. Darvas, according to his book, never struggled much with this. I wish I could say the same from a personal standpoint.
What ultimately brought Mr. Darvas success was his method of honing in solely on price action, and holding these stocks that continued to make new highs. Using stops, and then trailing stops. He learned to be patient, and close his ears to the noise that surrounds the markets.
It also didn't hurt that in retrospect, while Mr. Darvas found great success, America was in one of the biggest bull markets in recorded history. Nonetheless, the man made bank and I say, good for him.
I recommend this book to any individual investor / trader who has a desire to succeed in the zero-sum game the markets provide those of us who wish to play.