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OK. After your amazing success in the late 1950’s and after publishing “How I Made $2 Million In The Stock Market” how did life change for you? NIC: It was an amazing period in my life. I went from $25,000 which was everything I had at the time to a multi-millionaire in quite short length of time. But I was amazed at the publicity I stirred up in Time Magazine in 1959. I never knew there would be such a big interest in a solo stock trader. Then the success of my book was another major accomplishment in my life. It sold over 400,000 copies in the first year you know. Sure I was much richer than I dreamed I ever would be by 1960 but my life never changed. I carried on dancing and investing. I was able to buy more properties throughout the world with my financial success. For that I was grateful. As a person it never changed me one bit. Glad to hear it Nic. I got that impression. You seem a very sincere down to earth guy. Do you think this attitude helped you succeed in the stock market? NIC: Maybe it’s not for me to say. I never got too down about losses. It never bothered me if I was out of the market for months at a time. And because my system dictated when I got out of a winning stock I never got anxious or excited about hose winners. Looking back, I suppose it was quite remarkable how I could go from $25,000 to over $2 Million with such calmness. That’s me. After the massive success in the late 1950’s I took a portion of my profits out of the stock market and invested in property. I felt there would be no point of great success if I didn’t see something tangible for it. After that I felt like I was merely participating in a game. If I followed the rules I won money. When I broke them I lost. My challenge was following the rules. So you admit to still making mistakes in the stock market? NIC: Of course I do. It’s very hard not to try and cut corners even when it’s your own ultra money making method. Occasionally I get swayed. Break the rules. Lose money. But it isn’t very often theses days. What’s the biggest question you always get asked when traders find out you are Nicolas Darvas? That’s easy. Can I have your autograph and can you borrow me some money. Ha,ha. Really? Nic: No. Just kidding you. Hm.. the two most asked question I get? Let’s think. They would probably be….. ( To read the rest of this interview with Nicolas Darvas please email me at: stressfreetrader@tiscali.co.uk http://www.stressfreetrading.com By Mark Crisp © http://www.stressfreetrading.com 1) Have the markets changed? 2) Will you teach me how to trade? OK Nic can you answer those two questions for us? NIC: Sure. First off “Have the markets changed” In short No. You see the markets are simply human emotion reflected in $$’s. People really need to get this into their heads. It’s not about logic. Company results. Mathematics but emotion. When emotion and logic collide. Emotion will always come out ahead. The way I traded in the 1950’s and made such fantastic money was simply the same method Livermore and Barauech traded before me. I traded the same way right the way through the 1960’s and 1970’s. And I am certain it will be the same going into the year 2000. It’s all about riding huge waves of emotion to the maximum. The big money is made from these moves. It’s crazy. But we are only human. But having said that whilst the method does stay successful the mechanics of trading that method have and do change. As more and more traders adopt one method of entering and exiting these stocks the floor traders then see easy pickings as they fleece the crowd. My entry in the 1950’s bull market is slightly different to the one I now use in the 1970’s. You simply see what stops working and then use what does work. To recap. The main theory always stays true and always will be. The mechanics of trading that theory will change from time to time. The second question: Will you teach me how to trade? First off. No. I am not a teacher and it was never my intention to teach people how to trade successfully in the stock market. But you have everything you need in my three books to use my method. That’s basically all one needs to use my method. Sure it takes time and effort to really understand how to trade my way. But it’s all there. I know what you mean Nic. There are some “holes” in your books I am dying to ask you about. May I? By Mark Crisp © http://www.stressfreetrading.com NIC: OK go ahead. You say you never trade in a bear market. You only trade when the market has ”the best chance of giving you a winning trade” and that is a bull market. How do you tell if the current market is a bull or a bear market? Nic: Oh that’s really tricky and complicated. Not really. I simply look at a weekly chart of the averages over the past 6 months. If it’s generally going down it’s a bear market. If it’s going sideways or up I look for my stocks. It’s as simple as that. That’s it? Ha,ha… amazing. All those analysts spending hour after hour studying all kinds of economic reports, trends, forecasts, etc… and you simply look at the weekly chart. Shouldn’t they simply do the same? NIC: Probably. I too gave to laugh at the way the markets work. Hey..they have to justify their jobs somehow. And if means studying reports and writing forecasts good fro them. You’ll always find the simplest of methods work the best. This is why I have never really studied fancy technical analysis. It simply doesn’t make sense to me. What do you mean by “fancy technical analysis Nic”? NIC; Well you see, to me my method had to make sense. I had to be able to explain it to my partner (who knows absolutely noting about stocks) and she had to grasp the reason why it worked. In short it had to have a lot of common sense about it. My method was simply looking for the most in demand stocks, in the best sectors in a market Not GOING down. I would ride them as far as the ride would let me and exit when it was over…. Makes sense right? But if you ask many traders to explain their method and straight away they mention Elliot Waves, Fib. Retracements, Cycles etc… my question is always So WHY should a stock go up because of this? I am always left with a blank expression. They simply had no valid reason to trade these stocks. It had no common sense reason to go up. And I found most complicated technical analysis is like this. Great on theory short in common sense. Traders are much better spending their time on managing them-selves and managing their money than trying to find a new “secret” to the markets. Talking of time. How long on average pr day do you spend managing your trading account? Nic: I religiously read Barrons every day. Well not read it but scan through it and from this I can see the trend of the overall market the leading sectors in that market and the leading stocks. That’s about all I need to know. This takes about 10 minutes. If I am in the market I then look at the quotes for my individual stocks to see if I need to move trailing stops. If I do I will wire my broker with my new orders. This takes about another 10 minutes. That’s about it. By Mark Crisp © http://www.stressfreetrading.com So on average you manage your multi-million dollar portfolio in 20 minutes a day? Most Mutual funds and some private investors will be shocked at this. Can you explain why they spend 8 hours+ a day managing their portfolios? NIC; Well it basically comes back to human psychology. A Mutual fund managing many millions of dollars for one Mutual Funds simply do have the flexibility to jump in and out of most the momentum stocks. This is the single biggest advantage that most individual traders have over the large mutual funds. You also have to realise the process that goes behind managing stocks in a mutual fund. They cannot simply see a stock going up and buy it. They have to go through a whole process of and meetings with the management, shareholders, analysts. And this can mean buying a stock is a process that can take many weeks. Under this time, the stock and wealth advanced 10, 15 20%+. This puts them a huge disadvantage. I'm not dead against mutual funds at all are simply believe a good individual trader can easily outperform in and wipe a 5% management fees. When he can do much better by yourself. So to answer the question, the answer is simply about five to 10 minutes a day. I think any longer than this and it can actually be detrimental to your trading account. Nick going through the book : “How I Made 2 million in the Stock Market.” It it's quite obvious that you took some enormous risks early on in your trading career. I mean, at one stage, you are trading your whole account, on 50% margin, and if I had have gone wrong. It's safe to say, you probably wouldn't be the position you are now. Some people might even call you a plunger and stock market got lucky. What would you say is that, how would you answer those critics? NIC: Critics? You are talking about my trade in E.L Bruce..right? What can I say? Sure maybe in hindsight it was a bit a gamble but it sure paid off to the tune of $295,000 Everything seems so right at that time. The markets were strong. That stock price and volume action was fantastic. I had made enormous profits in Lorillard and Diners club just previous to this trade. I figured if I placed a tight initial stop loss I would only be losing a small percentage of these profits. The gamblers are the people who buy and hope. Sure I traded big but ONLY WHEN all the right element pieced together. I could easily go months without a trade. I even went 2 years without making a trade. I have no “need” to lose money in the stock market trading any old stock. It either hits me right in the face as a great trade or I ignore it. AND when I am wrong I get out with a small Article Source: http://www.BharatBhasha.com Article Url: http://www.bharatbhasha.com/home_business.php/35840 Article Added on Monday, January 16, 2006
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