The Nicolas Darvas story is unique for many reasons. It is a true story, well documented and authenticated at the time of his interview with Time Magazine. Darvas did not have inside information or work within the financial industry, nor was he some sort of financial whiz kid; in fact, he was one half of the world’s highest paid ballroom dancing team. The difference is that Darvas was always working on the ultimate trading plan, incorporating risk management rules that would finally lead him to amass a small fortune within a few years.
The Darvas story is unique in that there is no mystery as to how he made his fortune. Unlike other theories put forward by so-called market gurus there is no need to spend years attempting to unravel some mystical form of analysis. You can trade like Darvas today! Simple, practical and logical is the best way to describe “The Darvas Box Theory”.
Darvas’ story and his trading technique were described in his first book. His method, like all good systems is simple and founded in logic. All that is required is the discipline to follow it. Darvas’ discipline was remarkable. This coupled with his ability to analyse himself as well as the market was the root of his trading success. Through his self analysis he came to realize that “his ears were his worst enemy”.
He amassed his fortune without the help of computers, mobile phones, fax machines or any of the communications technology we have at our disposal today. He only had access to end-of-day data. All of his trading decisions were made outside trading hours, not sitting watching a live data screen all day. Starting with a purchase of only $3000 worth of stock, Darvas amassed a fortune of over $2.2 million dollars. This was in 1959 and would be equivalent to over $20 million dollars today.
A truly remarkable aspect of the Nicolas Darvas story is that he was travelling extensively on a world tour when he developed his trading plan. He was isolated from all external influences such as telephone, newspapers, brokers and other sources of so-called useful information.
Let’s look at how Darvas succeeded.