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 Darvasýs 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 werenýt always that dramatic. Usually, you never find out what caused the surge. You just profit from it. Darvas himself likened it to being a ýsilent partnerý 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 youýll chuckle a lot as you watch him plod through all the mistakes youýve 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 investorýs worst enemy. Finally he learns to separate emotion out and leave discipline in. It is the only way to make this system work.

Also, donýt forget that this is a combination of technical AND fundamental investing ý 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 ý itýs 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.


Books to read again and again. Not complete agreement w/IBD   February 5, 2002
51 out of 54 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.


One of the Best Books Written on Stock Market Strategy   November 18, 1998
26 out of 27 found this review helpful

This is probably my favorite book on maneuvering in the stock market. If you read William O'neill's "How to make Money in Stocks", which is also excellent, you will find he uses and expands upon many of Darvas' principles. O'neill also lists it as one of his top ten must reads on the stock market. Darvas' rules for cutting losses have helped me to limit my losses from 2 to 5 percent on average. I have avoided some serious losses from time to time(some up to 75 percent) by using Darvas' principles and cutting my losses quickly and have avoided avery market downturn in the last two years. While everyone was in distress about the '98 bear market, I was comfortably on the sidelines with my funds in cash thanks to this wonderful book. If more stars were available to rate this book, I surely would have given them. By the way, they're out of print, but if you can get Darvas' other books, "Wall Street-The Other Las Vegas" and "You Can Still Make it the Market", these are other followups that are just as good as "How I Made $2,000,000" and will really drive the points of his methods home.


A great true story about stock trading to wealth   July 23, 2006
Steve Burns (Nashville, TN)
26 out of 27 found this review helpful

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.


Almost a How To Book   June 9, 2001
Jon Covey (Torrance, CA USA)
17 out of 17 found this review helpful

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.