He generated a total ROI ( Return On Investment ) of 19,900% on $10,000 which is unbelievable and turned it into $2,000,000 in total 18 months.
Table of content
1. His Story
2. His strategy
3. My suggestions
His story (without this you may not be able to relate or learn his strategy deeply)
If you are a common person in working various professions, then you can relate to this story very well, as the person in this story, I am going to talk about Nicolas Darvas, who was also a common person like you and me, he was a dancer by profession and he used to dance in the front of many people at various functions, he had performed a large number of dance shows, but still, he was not generating a good amount of money to live a happy and financially free life.
While struggling financially, he once got an offer for a dance show in which he was not going to get the money for the dance, instead, he was going to get shares of one popular company of that time in the USA.
He found this offer different and more interesting than others, so he just accepted that offer immediately in order to dance in the exchange of shares of a company, and before this, he knew nothing about the stock market. He just knew that companies have shares that you can buy and sell, that's all knowledge he had about the stock market.
But the miracle happen here, after dancing show he got the shares of the company, and he kept those shares in a safe place and forgot about it, but after a few months, he listened to the news that shares of one company doubled and he found that this was the same company whose shares he owns. His shares of around $1,000 worth became $2,000 within a month without doing anything extra.
This was a very unbelievable thing for a common dancer, who tend to work so hard every day to earn that much amount of money and he got an almost equal amount of money just keeping shares at home.
This incident made this dancer go crazy about the stock market to understand this market and to earn more. Then he read several books about investing and trading and followed each and every so-called stock market Gurus and asking them for tips and pieces of advice which they can offer and he started reading the stock market news every day to find which company's share is going to increase, but nothing works, eventually, he lost 90% money he has invested in the shares brought on tips given by the so-called stock market gurus and news.
So, he left the idea to work on the tips of the other people and he started self-learning by reading many books about investing and trading, he used to read each and every book which he found related to the market to know the secret of earning from share market, and after learning something he started trading with a small amount of capital.
He traded each and every day, this time he was not in the loss, but he was also not in the profit, and at the end of the month he analysed the profit and loss statement of trading and he found that actually, he has earned nothing, instead his broker has earned more than his profits because, in a stock market, brokers earn little commission whenever you buy and sell, whether you are selling in profit or in the losses, brokers will always earn a small amount of commission.
So, he took a break from the real market and started thinking about the secret of earning from the stock market, and thought that there must be something that can help him to earn good money from this market. There must be some way.
Now, he stopped taking bits of advice from the different people and also stopped believing in the book blindly now he wanted to build something of their own which can give him profits, so he did the research for many days and in the daytime he used to perform dances and at the night, he used to analyse the shares of different companies daily and found a particular pattern in all of the shares, he found that all the shares are trade in the boxes, in other words, in ranges like $100 to $200, $257 to $320, $400 to $750, etc.
He found that when a share breaks the upper limit of the range, then the majority of times price increase and when the price has already given a large movement then all the news related to that stock come into the market to which many traders react in the later times.
He tested this technique a lot of times and found that it happening many-many times, share prices moved in boxes and moved above/ down first with breakouts and then the good/ bad news about those companies used to come in the market. Then share price moved more up/ down according to the news.
Now he started doing this, buy on breakouts with increasing volumes, and also while buying the shares that have gone above the range, he used to place the stoploss on that, in order to limit the loss, if anything happens opposite he does not lose much amount of money, when a price goes above and make the second box he will also trailer stop loss and he does not exit that stock until that stock reaches the top while making box over each box and when the price breaks the box's lower limit, he will exit.
So, he was just doing the swing trading by trailing stop losses and maximizing his profit, and exiting his bad trade earlier.
To diversify his risk he always used to trade in the fundamentally strong companies and he used to buy the shares of 4 or 5 companies all together to divide the risk, if 2 fail other 2 will give him better returns.
In this way, if one or two company's shares generated a false signal then he will exit that stock very soon by hitting stoploss, but other companies which are in favour of him, he will get maximum profit from it and exiting them only when they make new box above the previous box and stock price breaks that box's lower limit.
Now, after trading for a long time he visited his broker's office and wanted to know his profit and loss account to know how much profit he actually made, but when his broker analysed his profit and loss statement he was completely shocked that how he earned total money of more than 2 million dollars. This is a lot of money at that time, even today also.
Soon this news spread like a storm all over Wall Street, that one dancer has earned 2 million from the stock market and he was also featured in the Forbes magazine for his extraordinary performance.
Just following this simple strategy he was able to make out 2 million from the stock market without any help of any stock market guru or any tips providers.
He shared all his techniques in detail in his book — How I made 2 million in the stock market by Nicolas Darvas — in order to help everyone and give them the great example that if a normal dancer can do it, you can also do it.