How I made $2,000,000 from the Stock Market

A short, sweet and simple read of less than 150 pages covering the journey of Nicolas Darvas, how back in 1950s he made $ 2000000 from the stock market. It does not give you any secret sauce to succeed but provides the mindset and discipline to become a successful trader. He received the stocks of Brilund after performing in a nightclub and earned a few quick bucks which attracted him towards the stock markets. From thereon he got that fascination and perceived markets as some quick buck printing machine.

The book is divided into 10 chapters each showing a significant phase from his trading journey, Chapter 1 covers from being a newbie relying on brokers tip and running behind the “next big thing” to losing a significant portion of his capital.

In Chapter 2, how he got to learn some of the basics about the market terminologies, filtering out information, filtering out stocks on the basis of “fundamentals”. He made his own rules after some reading like never follow advisory services, ignore wall street sayings, do not trade OTC, say no to rumors, fundamentals over plain gambling, holding one rising stock for long period rather than juggling with a dozen. Basics were in but the thing he now lacked was psychology to bind it all.

Chapter 3 and 4 covers the psychology, mindset and systems part and is quite relatable for the newbies who just got their hands burned for first time or just got trapped in the markets. Darvas explained how he felt when he lost, greed took over and fear overpowered rational thinking which eventually lead to creation of his own trading system. A trading system which some fixed set of rules developed on his own by looking at the techno fundamental aspect combined with psychology. He observed box type pattern in movement of stock prices and theorized it into a system. With strict stoplosses and probable mindset he layed out The Darvas Box theory.

In Chapter 5 and 6 This is explained well in the book using case studies, charts, telegram wire messages and the psychology behind such trades. The importance of self discovery and “what suits best for you” approach along with tabulation of trades and movement of his stocks along with broader markets.

Chapter 7 and 8 Techno Funda approach i.e. (for Darvas) to hold the stock for 20 years and had revolutionary products which could to improve the earnings in future. After a few years of being in the markets, Darvas collected all the ingredients slowly and steadily and applied his theory into the real markets. His capital increased overtime and total profits clocked around half a million dollars.

Chapter 9 tells the psychology of traders after winning, the signs of infallibility and deceiving your own system, letting your losses run, blaming the markets, following the herd etc. Darvas came back to New York and was addicted to watch the movement of ticker. He realized that being at Wall Street did not work for him and the overload of noise kills the signal which eventually lead to losses. “My ears were my enemy. I was reading too much.” So he decided to move out of NY and rework on its older system.

Chapter 10 concludes the book showing how Darvas raised out of the second crisis, got his confidence and psychology back and went heavy, independently, doing all the basics right and made overall profit of $2Mn. He used simple theory, cut his losses short, let the winners run and not watch the ticker over and over again. It took him 8 years in doing so with constant effort, discipline, hard work and randomness.

How from making nearly half a million from OTC trade to making a killing in Universal systems, Zenith Radio and Fairchild Camera. The book includes his trading journal, charts, wire messages along with the method of stock selection which is quite easy to read and understand. Overall, it’s a light book to read and spend the weekend which gets the basics right for you to enter the stock markets. No high end vocab or heavy use of technical language but just a plain, basic things like price action, volume and mental might which leads a successful trader to win, consistently. Go ahead, get a copy and finish it by this weekend.