Darvas methods?

The interview didn't sound very "Darvas like" to me either. I also picked up on the "Barron's every day" line.

My own research on Darvas isn't very extensive beyond reading his books. However, I did find out that the charges the the NY AG tried to bring against Darvas were not only bogus, they served to provide government proof that Darvas earned $210K in his American brokerage account. Darvas freely admitted that he had multiple brokerage accounts and Lefkowicz did not have access to his overseas accounts.

Darvas seemed to be the consummate winner. I hate that term - winner - it reeks of arrogance, but Darvas really knew how to win in any situation he was put in. Whether it was escaping from Europe when war broke out or speculating in the stock market he came out on top. He is a role model to me.

One other thing I wanted to mention about Darvas - in one of his lesser known books, "profit in the otc markets", he made a few predicitions about the future. He predicted that radio communication would become digital, and he pointed to the fact that the astronauts who landed on the moon used digital communication. He was 100% right about that, all those years ago.

He achieved immortality through his achievemnents and his communications about his achievements. All these years later we still talk about him. He would be very pleased indeed.

Some day I hope to visit the King George V hotel in Paris and have a "Lowenbrau, extra cold" in his honor.
 
Quote from Darvas Guy:

Yes, you're right. When he died in 1977, he had homes in Paris, London, and the South of France. He also spent his time in the U.S. living in some of the nicest hotels in New York, such as the Plaza. Not exactly the behavior of someone who had bottomed out.

That referenced excerpt which tries to paint Darvas in a negative light, to be fair, comes from a book where the author's motive is to essentially claim that nobody can really make money in the markets. I think that needs to be acknowledged. And frankly I find the claims troubling in light of the author's agenda and his vague reference to Darvas via claims of random individuals who said they had interactions with him, and not actual facts or records.

I'm actually fairly involved in chronicling the life and strategies of Nicolas Darvas. In particular, I recently made contact with one of his personal acquaintances who is still alive and well.

He told me that Darvas was actually a pretty frugal man. Yes, he had several homes and chose to live in grand hotels, but that was due to his preference to travel frequently, and not to be "showy" about his money.

Darvas, besides trading, also got heavily involved in real estate speculation and business ventures involving the theatre and fashion industries during the 60s and 70s. I understand that some of these deals and ventures were not particularly successful, but again, Darvas had by no means fallen on hard times as far as I've been able to find in my research.
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Good luck with your book about Nicolas Darvas.
 
Guys like Darvas and Zanger are products of timing and personality.

When that combination occurs fortunes are made!

I have spent many hours in Dan Zangers room and he is a very unique man.

He and Darvas shared the same personality make up.

The only problem is they only do well in Bull Cycles.

I don't want to sound arrogant but I can out trade Zanger in any market but a bull and I have made many trades opposite of his that worked out very well because he only does what he does very well.

It's my personal opinion that a true trader needs to be adaptable for all market conditions.

Keep in mind when I say out trade Dan I mean on a relative bases.

My profits are minuscule compared to his but my abilities to adapt are far better.

That being said I would much rather have Dan's bank account then mine.
 
Quote from Vespasian:

Guys like Darvas and Zanger are products of timing and personality.

When that combination occurs fortunes are made!

I have spent many hours in Dan Zangers room and he is a very unique man.

He and Darvas shared the same personality make up.

The only problem is they only do well in Bull Cycles.

I don't want to sound arrogant but I can out trade Zanger in any market but a bull and I have made many trades opposite of his that worked out very well because he only does what he does very well.

It's my personal opinion that a true trader needs to be adaptable for all market conditions.

Keep in mind when I say out trade Dan I mean on a relative bases.

My profits are minuscule compared to his but my abilities to adapt are far better.

That being said I would much rather have Dan's bank account then mine.
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Well, Darvas only traded in bull markets...

PS. A new interview with Dan Zanger:

http://www.chartpattern.com/cf/images/new/articles/traders-world-2010.pdf
 
Quote from deaddog:

Have you found any reference to this? I doubt it, as Darvas published several book on investing after this alleged incident. [/B]
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From my research, it would appear that this too is a huge exageration made by the author trying to discredit Darvas.

Yes, the AG went after Darvas. Why? Because Darvas had upset the big boys of Wall Street a great deal. (And the AG wasn't the only one who answered the call to go after Darvas. Barron's buckled to the pressure as well and at the last minute, pulled a review of Darvas' 2nd book, "Wall Street: The Other Las Vegas", and never published it.)

High priced brokers were mad at Darvas and his story because clients started looking for cheaper options to make trades (they wanted to use the Darvas System and therefore didn't want to pay for a broker's advice). Fund managers were mad for the same reason - people were taking their money out of funds to try and run the Darvas System. And finally, the exchanges were mad because all the stops started piling up and creating mini-flash crashes (the Amex actually banned stops for awhile due to "the Darvas effect").

Of course, none of these Wall Street fears actually panned out and killed brokerages, funds, exchanges, etc. Most people who tried the Darvas System likely found that there's a big difference between reading about how to trade and actually trading. The emotional forces involved, for instance, but also Darvas himself was initially pretty vague about his system - especially in his first book.

But back to your question. The AG went after Darvas and demanded he open up his accounts. Darvas admitted to having multiple overseas accounts he traded with. The AG got his hands on just one of Darvas' accounts, which showed profits of ONLY $200k-plus.

In the end - likely because Darvas didn't want to go through all the trouble and expense of having multiple accounts audited (and perhaps for tax reasons, since he was operating with overseas accounts) - Darvas DID make a deal with the AG. The AG would stop the accusations and drop the investigation into Darvas' private accounts if Darvas agreed to NOT manage a fund. At the time, there was a lot of interest in this as investors were asking Darvas to launch a fund.

Based on my research, that is basically what happened.

Frankly, it was easy for Darvas to agree to not manage a fund. He traveled often and enjoyed his freedom. Plus, when his system took him out of the market, he'd spend months and months on the sidelines. Most clients wouldn't pay a fund manager to sit on the sidelines with their money inactive for a year.
 
Quote from Darvas Guy:

From my research, it would appear that this too is a huge exageration made by the author trying to discredit Darvas.

Yes, the AG went after Darvas. Why? Because Darvas had upset the big boys of Wall Street a great deal. (And the AG wasn't the only one who answered the call to go after Darvas. Barron's buckled to the pressure as well and at the last minute, pulled a review of Darvas' 2nd book, "Wall Street: The Other Las Vegas", and never published it.)

High priced brokers were mad at Darvas and his story because clients started looking for cheaper options to make trades (they wanted to use the Darvas System and therefore didn't want to pay for a broker's advice). Fund managers were mad for the same reason - people were taking their money out of funds to try and run the Darvas System. And finally, the exchanges were mad because all the stops started piling up and creating mini-flash crashes (the Amex actually banned stops for awhile due to "the Darvas effect").

Of course, none of these Wall Street fears actually panned out and killed brokerages, funds, exchanges, etc. Most people who tried the Darvas System likely found that there's a big difference between reading about how to trade and actually trading. The emotional forces involved, for instance, but also Darvas himself was initially pretty vague about his system - especially in his first book.

But back to your question. The AG went after Darvas and demanded he open up his accounts. Darvas admitted to having multiple overseas accounts he traded with. The AG got his hands on just one of Darvas' accounts, which showed profits of ONLY $200k-plus.

In the end - likely because Darvas didn't want to go through all the trouble and expense of having multiple accounts audited (and perhaps for tax reasons, since he was operating with overseas accounts) - Darvas DID make a deal with the AG. The AG would stop the accusations and drop the investigation into Darvas' private accounts if Darvas agreed to NOT manage a fund. At the time, there was a lot of interest in this as investors were asking Darvas to launch a fund.

Based on my research, that is basically what happened.
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Your description of the period and how various parts of the financial industry behaved is noteworthy.

The telephone was the common means of communicating intended actions. Brokers were a funny bunch then.

Trading in odd lots was almost impossible (several reasons).

The WSJ's last page had the NYSE on the last page and inside was the AMEX. We tore it off and underlined the stocks we were charting by hand on a custom chart. we used brownlines so we could exchange "blueprints" of the penciled charts when we were "holding" that stock.

We used volume just as Darvas did and he followed the trap and continuation of Dunnigan, Our difference in approach was what really teed off the brokers.

Brokers were used to stock pickers trading on the fractal that both Darvas and Dunigan used. The big thing was a process whereby brokers "passed the word" on what so and so was doing.

Since our group was all IBM employees or guys who did "work" projects for the YMCA, the local firm (MLPF&B) brokers all shared what the group was doing with one another.

Now for the fireworks. We were very conscius of FBO's and how they wre sgnalled. See the Trader666 example where he fucks up the FBO read, for example.

Brokers did not like us doing FBO's and they also didn't like it that we traded the "natural" cycle while most active investors traded the IT as did Dunnigan and Darvas.

So it wasn't fun in some ways. The settlement in those days was longer than the nature trade. It was like a long shadow following the actions. Brokerage firms were doing a lot of float at the time and margin was between 50 and 80 % most of the time.

The combination of sloppy coattailing and slow settlement often get the brokers to do a lot of grumbling. what are you going to do next was often on the table.

My first interchanges with the SEC came from the ML guys speading the word on our trades for Poughkeepsie to NYC to the other ML offices.

At that time Darvas was making the news and his book was out. It was natural for ML to begin to look closely at our group since we were IBM'ers nad the YMCA locally was the place where community support got applied. For a while I had a day off a week to do liaison with the atch and contractor of the new YMCA building. The general manager at IBM was part of our trading group and we both were on YMCA committees. LOL so were some brokers from ML.

The phenomena of making money on stocks was roughly unknown to "the street". The work ethic prevailed and most people had 1 job for there entire working career.

By 1960, I had a parking space @ IBM and I parked my Mercedes sports car in that spot. I was also exempt from using a time card and my hours were what I determined. IBM also picked up my golf fees since they were part of my health assurance.

My commissions per week were more than my salary and I was compounding at max and maxed our on 80% margin.

By trading the natural cycle and deploying a FBO component of the P,V relationship introduced by Dodd/Granville, out group was "definitely" upsetting the system @ MLPF&B.

In the coattailing that MLPF&B did, they embellished the facts with lies and creative "stories". Sometimes there were negative consequences.

Look at Trader666 to see how a client could get pissed by not understanding what his broker was telling him. Some clients did get pissed my missing trades because the coattailing network was one that operated in the dark just as Trader666 keeps operating in the dark.

The SEC stepped into the picture on a rumer made up and promulgated by ML.

A stock had caught our attention. We back plotted it on out "B" size chart (11x17 covering 6 months). We bought in on a Dunnigan trap and held through the Dunnigan "continuation" all based on Dodd/Granville.

We exited at the end of the trend. And the SEC was making noises by that time. The stock went back to the original entry level.

The "Darvas" aspect was there in full view and the SEC required a joint statement by both CEO's.

We traded from 4 to 22 and many coattailers did something like that. This was a short term trade following the natural cycle.

In todays parlance of designating parallelograms of trends, the trap is from RTL BO to point 2. The continue is from the BO of the RTL to the FTT of the trend. This is found on the "Unusual Volume" one pager, (tested but denied by trader666).

It is an exact science orientation. Entry is on the end of DU and the beginning of FRV and the exit is when Peaking volume does not keep up. The catenary which is the basis of the lookup table, was drawn then verified by 400,000 elements. No changes were made.

The mind can provide answers to users of the mind. How this iterative refinement works is based on doing drills with the mind.

Owning a stock from 4 to 22 meant that the brokers who had been following our trading for a couple of years got interested in how we were making money in a way that was getting publicity from magazines and books written for the and distributed by ARC. You can see how TIME vetted Darvas using financial people who were totally ignorant of how markets work.

Maybe it is possible to see how ML would try to blindly use information in their shop to get others to trae with them. ML paid big fines for their lies and embellishments.

For me, I was an observer of this and it was in the context our trades being coattailed to make money for other clients of ML.

The third mistake ML made with me caused me to change brokers.

At that time, the social milieu, in which I participated had a society context. It was considered very Nuevo riche to behave as our family behaved. Money had to be made by generations instead of in a few years. there was some sort of rock solid understanding that annual returns could not be done in 6 to 8 days. It was nor appropriate to also be leveraged @ 80% margin.

What happened because of Darvas was that the brokerage community learned then and there that they had clients who knew how to use science and technology to make money to the extent that is was offerred.

they learned:

1. A quality Universe is a requirement.

WJO'N popularized his later when he took his wealth beginning with 500 dollars to found IBD and report the quality of stocks using percentiles for EPS and RS.

2. Trends are cyclic and follow an order of events precisely.

A parallelogram contains trends and the defining points of parallelograms include three price moves and four volume moves. Fractal by fractal these points interlock the fractals on about several levels from the finest granularity to the longest duration economic trends.

3. The compound interest formula dictates the relative importance of the markets three variables

In order of importance they are: the exponent, the rate of profit per turn and least, the initial capital.

4. Trends and nested fractals are precisely defined by the relation of the pieces that build these contexts.

As pointed out by Hawking and his coauthor, tools of mankind have limitations and beyond that, by the mind's reason, nothing can be used to create something. A quality system puts the smallest pieces together to make the whole. Precision emanates in parallel with this building process. Today 6 degres of freedom define raw inputs, they manifest about 70 degrees of freedom that can be used in subsets to precisely define the market's operation. The market dictates to the trader and the trader, optimally extracts the market's offer as it is made.
 
Darvis's system was actually very simple. First, he found the hot sector. For example, maybe something like cloud computing servers today. Then he waited for a massive volume day. Once he saw the big volume, he would start to watch the daily quotes. He would wait for a new low that holds that low for three days, and that became the bottom of the box. What ever recent high had been made was the top of the box. Then he simply traded the box, and that's how he got rich. End of story. No reason to make it more complicated than that, other than the fact that it's human nature to make things as complex as possible.
 
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