How I Made $2,000,000 In The Stock Market

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 Darvasys 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 climb...in 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 werenyt always that dramatic. Usually, you never find out what caused the surge. You just profit from it. Darvas himself likened it to being a ysilent partnery 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 youyll chuckle a lot as you watch him plod through all the mistakes youyve 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 investorys worst enemy. Finally he learns to separate emotion out and leave discipline in. It is the only way to make this system work.

Also, donyt forget that this is a combination of technical AND fundamental investing y 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 y itys 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.


How Darvas Made $2,000,000 in 2 Years While Traveling the Globe.   November 12, 2005
mirasreviews (McLean, VA USA)
88 out of 97 found this review helpful

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.


False prophet or should we say "false profit"   August 7, 2001
54 out of 75 found this review helpful

The book was written decades ago for a mass audience that was curious, but largely uninformed, about the stock market. They wanted an easy way to profit from the market of the post-war era without suffering the losses tat the previous generation did in the 1930's. Its secret for success (as a book)was to tell an empathetic story that novice/failed traders could relate to and promise them a simple solution. Top the story off with a $2,000,000 happy ending, and you've got the makings for a bestseller.

It's a formula that still works. This book seems rather popular with most of its reviewers.

Darvas's autobiographical book, unfortunately, has a large element of fiction. It is a not-too-well kept secret that he greatly exaggerated the degree of his success as an investor--which diminishes his credibility. It is not that the ideas of buying stocks that are moving up or cutting your losses quickly are bad ideas, it is that such ideas should not be confused with having any understanding about the market. If stock prices were random: (1) the technique of cutting one's losses quickly would improve your results nonetheless, and (2) the idea of buying a stock that was moving up (a higher box) would be rendered meaningless.

Don't look for deep investment wisdom here. Look for a story about a trader that you may find amusing. Keep in mind that you don't always get the straight story about someone's level of trading success--now or when this book was written.


Somewhat puzzled...   June 7, 2006
G. Soos (Dublin, GA United States)
38 out of 42 found this review helpful

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.



Books to read again and again. Not complete agreement w/IBD   February 5, 2002
36 out of 37 found this review helpful

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.