What is the Darvas Trading Method?
At some point in your career as a trader, you would want to know about the Darvas trading method. Just what is this all about and how can it help you achieve outstanding stock profits?
This strategy is actually simply a trade system. This is a plan that a good trader follows to define points of entry and exit and to determine appropriate risk management rules. This particular plan is quite attractive when one remembers how well the original author profited from it. Nicolas Darvas was actually a globetrotting ballroom dancer. During his time in the 1950s however, he was able to earn more than many individuals who specialized in just trading. To be exact, the dancer was able to make $2.2 million out of just $25 thousand.
Like other stock trading systems, his had some technical aspects. There was however an easy way of to understand it. In essence, it was a trend trading method. A good part of it was focused in pinpointing strong trends and stocks. According to Darvas, assets that were already strong limited the need for constant monitoring and also lessened the chance of suffering significant losses. Darvas used such factors as price action and volume to identify these strong stocks.
This technique has been making waves because studies have revealed that it provides good results close to 50% of the time. What makes it even more enticing to use is that it is capable of preserving capital. What this means is that even if you start losing, you will never lose too much by following the Darvas trading system.
Darvas didn’t have a smooth time devising this method. He had to face several losses himself before he started enjoying profits. His losses stemmed mainly from the error of not asking questions and following too many pieces of external trading advice. Darvas realized in time that he lost a lot when he listened to others and when he tried to appear knowledgeable in front of his broker. He began making good profits when he used data from his own research and when he admitted that there were things he needed more information on. His plan becomes highly recommended when one considers that the Darvas trading method was an offshoot of a negative phase in his trading career.
As a trader, it is always worth your time to study or even apply strategies that already work. Doing so won’t just save you a lot of time. It will also give you peace of mind knowing you have a plan that has already worked for so many other successful individuals.
Darvas’ plan can be followed straight out of the box. Be careful though. You have to make sure that his plan fits your profile and personality as a trader. It has to fit your preferred risk management plan. The most important part about applying stock trading systems is knowing that you are able to take the level of risk that you can live with. Darvas’ technique can and will work but don’t be a blind follower. Find out everything you can about his system and how it applies to you before you start using it.
Want to find out more about the Darvas trading system? Visit http://www.nicolasdarvastrading.com.
