Customer Reviews: How I Made $2,000,000 In The Stock Market
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on February 5, 2002
I think this is an investing classic, for a few reasons:
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.
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on December 23, 2002
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? Well, first, he used margin.
Second, he was a genius! Lucky thing is, YOU don't have to be one to read this highly entertaining, readable book and use the techniques which Darvas intuited, pioneered and refined.
This is the book that stopped me from being terrified of the stock market. The method it uses is so sound and so brilliant that it reduces the risk of loss to an almost negligible level. And despite what some say, it works even in a bear market; in fact, Darvas made most of his money in a period that was historically considered to be a "baby bear" market. The difference is that, during a bull market, Darvas-worthy stocks show up ten times a week. During a bear market, one of these stocks may take six or eight months to show up.
Why do I say it works? I've tried it. The almost shameful secret here is that it's like being an Inside Trader without an inside trader's information. You can still cash in, though. Darvas's system catches stocks that are - in most cases inexplicably and with no accompanying news - suddenly experiencing heavy buying, driving them up powerfully to challenge and break through previous highs.
And why are these stocks doing this? Nobody knows. Why does a pharmaceutical company in business 13 years which has never been able to bring a drug to market, never made a profit, and is predicting worse earnings to come suddenly have people buying it more and more each day, its price running up steadily and strong, with absolutely no news out of the company? Who CARES? In fact, one of Darvas�s rules was to read absolutely NONE OF THE NEWS about the stock! The Darvas system just spots the stock as it climbs. If it breaks through that previous high, you will buy it along with all these other people you don't know. And when the stock continues to three weeks, and THEN the company announces it has just released an FDA-approved drug which is the strongest anti-influenza drug to ever hit the market and already has a distribution deal with Johnson & Johnson, you might understand. You might understand that a LOT of people knew something. They just weren't telling. Luckily, you didn't have to be one of them, nor did you have to be to enjoy the further $10-in-one-day jump it experienced the day the news broke. And if you followed Darvas' trailing stop-loss requirement, you automatically sold when it fell back down.
This happened to me, and I've done it DOZENS of more times, though the climbs weren�t always that dramatic. Usually, you never find out what caused the surge. You just profit from it. Darvas himself likened it to being a �silent partner� with all those people in the know.
One warning: you either understand what the system is by the way it's explained here, or you don't. To me it was as simple as pie, and with the Internet screening techniques available today (which Darvas didn't have in his early days - further proof of his true genius was his ability to make "mental charts" without looking at physical ones - abstract thinking characteristic of a very high IQ) these stocks can be found if they exist. But more people DON'T grasp the system than do. This is especially clear in the remarkably funny Q&A section at the end of the book where you find that people are entirely missing his concepts and he is almost at a total loss to explain what seems so obvious to him.
This is not day trading. But neither is it long-term buy and hold. I think it hypocritical of Darvas to claim he was a long term investor - he was long term only as LONG as the stock stayed in its "box" or moved up into a new one. If it moved down, he was OUT OF THERE. That's NOT long term investing. It's smart investing. And Nicolas Darvas is my investing hero.
He made all the mistakes that all of us make, and you�ll chuckle a lot as you watch him plod through all the mistakes you�ve already made or may be about to make. Then he hits on his system, makes a lot of money, gets very humanly egotistical and even arrogant about it, and almost loses it all as he gives in to overconfidence and the other very human emotions which are an investor�s worst enemy. Finally he learns to separate emotion out and leave discipline in. It is the only way to make this system work.
Also, don�t forget that this is a combination of technical AND fundamental investing � stocks are located by technical signals, but are further analyzed fundamentally (if only to a minimal degree) before being considered as buy candidates.
This book reads like a highly entertaining novel � it�s hysterical when news of his success leaks out and TIME magazine sends three different sets of editors down to interview him and study his system before they finally decide he is for real and end up printing his story and putting him on the front cover. Which is what eventually lead to the demand for this must-have, must-read classic.
Darvas is legendary, and with good reason. Find out why.
P.S. Buying this book with How To Make Money In Stocks by William J. O'Neil is a perfect combination, as O'Neil, the founder of Investor's Business Daily, helps clarify, and builds on, Darvas's techniques, although - shame, shame - he doesn't give him credit.
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on June 6, 2006
I am somewhat puzzled about how THIS book became a "classic". Mr. Darvas, "world famous dancer" with no training in stock trading starts out with a $3,000 investment in 1952 that would turn into a $2,250,000 fortune by July of 1959. All this was done via telegraphs from Saigon through Paris to New York to wherever else he was invited to perform. This process included some weird technicality called "stock-right bonus purchase option"; a desperate over-the-counter buying frenzy of a trade-suspended stock when short sellers made a bad call and some other exotic stories. Also, it should be noted that the author traded using various margins that significantly increased his leverage. (By the end he had more than $500k working capital along with a $3,500/week "regular" income.)

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.
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Nicolas Darvas wrote "How I Made $2,000,000 in the Stock Market" in 1960, shortly after he had made over $2,000,000 trading stocks in a little over 18 months. But the story starts in 1952, when Darvas, a ballroom dancer by profession, acquired his first stock in a Canadian mining company almost inadvertently. He sold it at a profit, and he was hooked. But Darvas knew nothing about the stock market. He learned everything the hard way, and that's what makes this book interesting. Darvas is a colorful, overbearing, but frank character, and he takes us through his quest to figure out how to make money in the stock market step by painful step.

Darvas divides his learning experience into 4 parts. At first he was "The Gambler", acting on tips and impulses. That failed. Then he got serious and became "The Fundamentalist", reading annual reports, listening to analysts, and investing accordingly. That failed. So he became "The Technician", developing his own method of anticipating a rise in stock price, which he called "box theory". He wasn't losing much money, but he wasn't making much either. Finally Darvas devised a method of predicting stock price movement that incorporated all of his hard-learned lessons. He became "The Techno-Fundamentalist". He selected stocks based on earning prospects for their sector, but bought the leaders in their sector only when price movement looked promising according to his box theory.

Nicolas Darvas comes to the same conclusions in "How I Made $2,000,000 in the Stock Market" that many other books on trading or short term investment have for nearly a century. He's a short term investor, not a trader, who advises you to: follow the trend in price movement, buy in pyramid fashion, cut losses quickly, never buy on tips or advice, and never try to sell at the top. He may as well be Gerald Loeb or Bernard Baruch in the 1930s. But a few things make this book interesting: Darvas failed a lot while he went through various investment philosophies that many aspiring investors can identify with. He created his "box theory" from scratch, which yields much the same information as tracking support and resistance on a candlestick chart. Best of all, his story is unusually entertaining. Darvas made most of his money while on a 2-year world tour with his dance act. He received stock information daily by telegram, in code, and communicated his orders to his brokers while on the move. His mysterious cables often aroused suspicions of espionage in foreign telegraph offices. I found the whole thing hilarious.

"How I Made $2,000,000 in the Stock Market" is only 129 pages long. Some additional material is included at the end of the book: Darvas tells the story of his 1959 interview with a "New York Times" reporter. There is a section containing examples, with comments, of the cables Darvas sent from far flung locations around the world. There are candlestick charts for the stocks from which Darvas profited the most. And there is a Q&A section in which Darvas answers the questions most commonly asked by his readers. The paper the book is printed on is super-cheap, and the text isn't centered properly on the pages. Not a quality publication, but it's readable.
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VINE VOICEon July 23, 2006
I rarely give 5 star reviews but this book was truly an enjoyable read that taught me alot. Here are the key lessons:

1). ALWAYS have a stop loss order in place when you buy stocks, about $1.50 to $2.00 under your purchase price, this safeguards you against the huge losses people experience in a bear market.

2). Watch unexpected volume surges in stocks that push the price up, this is a sign that other investors know something that you do not.You can partner with insiders and people in the know with out knowing what is really driving the price.

3). Never sell a stock that is rising in price.Only sell on declines.

4). Watch price boxes that develop in stocks, if a stock is trading at $66 to $70 for 6 months then suddenly goes to $72 it is likely the sign of a new price range box, buy at break outs.

5). Take emotion out of tading set your rules and follow them.

6). Stay away from the rumors and mob mentality of Wall Street, get your information from Barron's weekly and daily quotes, everything else just leads to confusion.

7). Watch stock prices and go with the patterns you watch develop.

8). Look for the break away stocks that will make you rich, trade the stocks that are at their 52 week high if they are growth stocks and if they appear to be breaking new highs.

Darvas has an entertaining writing style and gets to the point. 5 strong stars, this is great information to tie in with what can be learned from Warren Buffet, Benjamin Graham, Philip Fisher, William O'Neal and Jim Cramer.
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on October 2, 2002
Nearly everything has a crude origin and, as time passes, becomes refined and developed. Mankind didn't start communicating by beaming an email to the other side of the country in a matter of seconds, rather, we used horse-bound messengers and slow-moving trains to make contact with others in distant places. Mankind didn't begin by driving to a restaurant and ordering a steak but rather, by going out and growing or hunting down food and cooking it over an open fire. Likewise, investors did not begin trading by typing a ticker symbol into a software program and picking a buy point on a bar chart based on well-established technical analysis patterns, rather, they bought stocks based solely on fundamental analysis.

After years of losing money in the market by taking others' advice and by using fundamental analysis as his sources for picking stocks, Nicolas Darvas developed technical analysis theories based on volume and price movement. Thanks to people like Darvas, who use their creative thoughts to question well-established principles when they believe them to be incorrect, traders now have a greater understanding of how to use technical analysis to make money.
In How I Made $2,000,000 in the Stock Market, Darvas describes how he would follow stocks and watch them bounce inside "boxes" of various shapes and sizes. Darvas would buy stocks as they were moving out of the top of their box and he would sell stocks if they fell out of the bottom of their box. Some of the other major lessons that Darvas learned during his journey to success include:
Only buy stocks that are in a consolidation, or better yet, focus only on stocks that are breaking out of a consolidation area.
Always place stop-loss orders just under the bottom of the consolidation area and use trailing stops to lock in swiftly made profits.
Develop your own successful system based on principles you know to be true and which you have confidence in.
When you find a system that you believe in and which is successful you should not allow others to influence you. Stick to your proven, successful plan and don't be influenced by others.
Traders should focus on only a few stocks. Darvas traded no more than 3 stocks at a time and his account was well over $1 million.
Volume spikes on up days indicate that there is a large interest in the company and that future advances are likely.
How I Made $2,000,000 in the Stock Market by Nicolas Darvas is an entertaining and thought-provoking book about how a man with no background in business (Davis was a professional ballroom dancer) used his own trading system based on technical analysis to turn $10,000 into more than $2 million by focusing on price action. This book is a great read for students of trading or for people who enjoy the burst of hope that often accompanies reading about the success of others.
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on September 5, 1998
If one looks at the biggest winners of the past several decades, one finds that practically all show the same "chart behavior" that he writes about in his book. Learn from the past. A word of caution to value-oriented investors: This will probably be a waste of your time. But for the person who naturally gravitates to growth stocks, and who doesn't shy away from a stock due to its high valuation, this is second only to William J. O'Neil's "How to Make Money in Stocks" as the best book written on how to use charts to limit risk, yet expose yourself to each year's big winners.
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on August 26, 2008
Back in 1980, I came across a copy of the original version of this book in a used book store. I can't begin to tell you how much I enjoyed it. I had been floundering around in the stock market for a year or two, and suddenly, after reading this book, I knew what I was up against, and why it was so hard.

This book is one of my favorite books of all time, on any subject. It's an absolute must read for anyone interested in stock trading. William O'Neill's methods as used in Investors Business Daily, is mostly based on Darvas' method, and Jesse Livermore's.

I'm not going to repeat all the details that can be found in other reviews, but I would like to add a few things.

The first one is this quote by Darvas, that was the culmination of all the trials and tribulations that had gone on before:

"The only sound reason for my buying a stock is that it is rising in price. If that is happening, no other reason is necessary. If that is not happening, no other reason is worth considering."

I point this out because anybody who has ever bought an IBD 100 stock knows that all of the stocks at the top of the list are stocks that have been rising in the immediate past. I also point this quote out, because of my next point.

Two, the Darvas method, like the IBD method ONLY works in rising markets. In sideways or down markets, you can get creamed. In my 30+ years of trading, I've tended to use this method MUCH LESS than other methods, for the simple reason that it doesn't work year in and year out, and that one tends to buy stocks at the top so that you're forced to keep selling stocks you just boought.

Sure, when it works, man is it great. I guess if a person only used it at the right times it would be wonderful, but year in and year out you are constantly faced with times when it doesn't work very well.

Even Darvas lost huge amounts of money after writing this book, and the next one in 1964. By time he wrote "You can still make millions in the market" in 1977 you could tell he was a beaten man when he ventured back into the market.

C.C. Hazard (pseudonymn), in his book "Confessions of a Wall Street Insider" {1972} talks about how no method really works all that well over time. As a life long stock broker, he saw it all. One time (around the time of the writing of his book) he had a broker friend of his check on Darvas' account balance. He wasn't surprised to find that Darvas had lost most of his money that he made in the 60s.

Also, I was amazed to see that Darvas' estate (or whoever owns the rights to the story) has published so many other books recently. Why would they need to do that? I would think they would be using his method to make millions in the stock market, wouldn't you?

So, BEWARE of this method and the IBD method. Over the long run you will find that they work less often than they don't.
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on October 21, 2007
From reading the cover, this book sounds like the very key to winning a fortune in the financial markets. The Holy Grail maybe? I would not count on that.

Let's look at two of the book's principal tactics:

1. Very tight stops (a fraction of a point)

Mr. Darvas acknowledges that his method will stop you out very frequently. In fact, a reader sends in a comment (back of the book) that this tactic will stop you out more than 90% of the time. The reader calls it "useless"

2. Stocks must be trading at an all-time high and be growth stocks that have suddenly made an "unusual" move.

Mr. Darvas acknowledges that this eliminates more than 90% of all stocks as trading candidates.

Let's look at how Nicolas Darvas turned $36,000 into $2,000,000:

Jones & Laughlin: Bet the farm on this stock, plus used margin. After two weeks sold out at a loss of 25% of his account. It took Darvas TWO YEARS to recoup his 25% loss. Not good.

E.L. Bruce: Bet the farm on this stock and used margin. This stock rose 250% in a couple of months. $300K profit

Universal Products: Bet half of his trading capital on this stock and used margin. Held for a few months. Stock rose 300%. $400k profit

Thiokol Chemical: Bet half of his trading capital on this stock and used margin. Held for a few months. Stock rose 300%. $900K profit.

As you can see, Nicolas Darvas was betting the farm on his trades and using margin to the hilt. The VAST MAJORITY of his $2 million profit came from just the above three winning trades. But he made hundreds of trades during this time. There is surely an element of luck here...

Darvas had read up on the stock market extensively and had years of experience by the time he hit his three big winners. He was not trading on ignorance at this point. The market was at the tail end of a bear market when he figured out that the volatile growth stocks are bound to rocket early in the recovery. He acted on this and it worked this one time.

Does the Darvas method sound like the answer to making a speculating fortune? Well, at least it sounds simple enough. Pick stocks that are gonna rise 300% in just a few months and then shoot the works. That's all! You'll either make a killing or be killed.
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on June 9, 2001
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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