DARVAS trading

vetten, I believe Brandon hit the nail on the head...

I don't trade the method exactly like Darvas, my money management and stop placement is very different but the general idea of the Darvas method still holds true today...

basically... emerging market leadership stocks with huge growth potential, that experience a thrusting breakout to an all time high seem to provide an excellent opportunity for huge trading profits.

It's tough for me to answer your stop question because no stop method works perfectly... basically the closer your stop the higher the probability of being stopped out but the farther away the stop, the smaller the position or the more risk you are taking... finding that balance somewhere in between that suits your personal risk profile is key.

For me... the hardest part is continuing to hold the positions when I have large gains... I have a tendency to want to take my profits when they get large and not continue to let them ride. Usually this costs me a ton of money because the real "key" to the system is these "fat tail' or "black swan" type of trades, like CROX recently that go up 200-300-500% from your entry.

Here are Darvas' trades...

Lorillard 100%
Diner's 50%
EL Bruce 229%
Universal 367%
Thiokol 325%
Texas 56%
Fairchild 47%
Zenith 19%

Basically, EL, Universal and Thiokol trades made him. Although they were huge trades it's not impossible to find 200 and 300% winners in todays environment.
 
Quote from trend_guy:

Yes, I trade like this... and it is working for me.

If you want examples that it is still working...

TCM.TO
RAL.TO
CROX
BIDU
FSLR
MA
AAPL
TNH
POT
RIMM
AMZN
ISRG
LPHI
NILE
PMG.TO

just to name a few.

Key is your money management... Darvas bet very bold... the bolder you bet the more you can potentially make/lose.
More...

Dear Trendguy,
The magic of Darvas was money management. It does two things -
1. It makes you invest in the best of the best
2. Your account doubles/triples very fast since the rocket you are riding is carrying all your equity along.
 
trend_guy,

thanks for your explanation

People think that Darvas took big risks with his positions.

but is that actually true?

if he bought stock and if the price went south, he was out in a flash., so never big losses.

if the price went up, his trailing stop depended on the stock`s behaviour. while the top box was forming, he still had his stop under the top completed box and he could give back a lot of money if the new box failed to form and the price dropped to his stop.

so the profits might go down, but they`re still not losses.

I think that how you manage your stops (stop loss and trailing stops) are crucial to anybody`s system.

its so true: keep your losses small and let your profits run.

the stop loss is the easiest part, but where to place the trailing stop is the most difficult, because every stock behaves differently.

on the other hand I think: so what if you get stopped out; brokerage is so cheap that you can get easily back in.

so an O`Neill/Ryan stop of 7% is not a bad idea as a trailing stop?

other peope use 3 different stops on every stock and are out if price hits one of these stops.
could be drop to a % and a moving average and RS figure.

what does everybody think: are the stops key to every system?:cool:
 
the risk in Darvas' trading was that a few times he was fully loaded in one stock... if EL BRUCE has of gapped down 20 point on him he probably would have been wiped out... if his stops just got hit he would have been fine... probably not a good idea to trade as bold as Darvas did with anything but pure risk capital.
 
Quote from ehsmama:

Dear Trendguy,
The magic of Darvas was money management. It does two things -
1. It makes you invest in the best of the best
2. Your account doubles/triples very fast since the rocket you are riding is carrying all your equity along.
More...

hi ehsmama,

Darvas sure took his time to buy a stock and was observing them for weeks/months on end. He sure had bucket loads of patience.

there was a guy here on ET who was copying Darvas` system, toby I think, and he bought stocks everyday. bit of a laugh though, `cos Darvas was so fussy.

what do you think of the risks of Darvas` money management?:cool:
 
Quote from trend_guy:

the risk in Darvas' trading was that a few times he was fully loaded in one stock... if EL BRUCE has of gapped down 20 point on him he probably would have been wiped out... if his stops just got hit he would have been fine... probably not a good idea to trade as bold as Darvas did with anything but pure risk capital.
More...

thanks trend_guy,

you`re right ofcourse, but then he initially would have a small position on.

so much has been written about all facets of stock trading.

is there nobody out there that has invented the best trailing stop(s) for all-time break-outs?

are there any good books on this subject?

thanks:cool:
 
trend_guy,

very interested in: emerging market leadership stocks

are you talking about ADRs?

would you mind taking the trouble to explain more about this?

what the best websites/books are to get more info?

thank you for your time.:cool:
 
sorry for the confusion...

when I said "emerging market leadership stocks" I meant...

stock that are on their way to becoming leaders but are not yet viewed as a leader by the average trader or the media

For example... a leader would be AAPL, RIMM, ISRG

An emerging leader would be VMW.

Obviously, to make Darvas type returns most of the time you will have to enter before everyone knows the stock is a leader.
 
Quote from vetten:

trend_guy,

very interested in: emerging market leadership stocks

are you talking about ADRs?

would you mind taking the trouble to explain more about this?

what the best websites/books are to get more info?

thank you for your time.:cool:
More...

Emerging leaders, to me, would be the names that have all the growth traits that will lead to stellar moves down the road, but for one reason or another the insititutions have not picked them up yet. In my experiance you can get some huge gains out of these stocks as both earnings expand and the price to earnings ratio explodes as more and more people buy into it. By that I mean this as an example. Two stocks earning $1.00 and growing earnings at 50%. One is relatively well known so its trading for $35.00 per share, the other is not, so its trading for $12.00 per share. A year later each is earning $1.50. All things being equal the $35.00 stock is now a $52.50 stock, pretty damn nice year. But, stock number two was "discovered" and is now a darling, so not only have its earnings grown, but so has its PE ratio, from say 12 to 20. Number two is now a $30.00 stock, and instead of a gain of 50%, you are sitting on a gain of 150%. You have benefited from both price to earnings expansion and earnings. This is very common actually and has been responsible for the majority of my overall gains in the market. There ya go, I just saved you $5000 on mentoring with me, coz in the past thats what I'd have charged you. I'd of course also teach you how to find those stocks, and the ones that are most likely to have the institutions pick them up, but honestly if you have any ambition, enough to show that your going to make it anyway, you will be able to take this and run with it, figure some stuff out. Hope it helped. If it did, as I've been saying for a long time I want a god damn Giordano's Pizza! :)

Brandon
 
Quote from vetten:

hi ehsmama,

Darvas sure took his time to buy a stock and was observing them for weeks/months on end. He sure had bucket loads of patience.

there was a guy here on ET who was copying Darvas` system, toby I think, and he bought stocks everyday. bit of a laugh though, `cos Darvas was so fussy.

what do you think of the risks of Darvas` money management?:cool:
More...

Dear vetten,
I think Darvas method is very risk averse. IT Forces you to put staggered amounts of money into the BEST POSSIBLE STOCK you can find out of the whole universe of stocks out there.
Imagine if you invested all your money in Microsoft in 80s (do you think you would want to diversify?)
Personally, I can't thank Darvas enough for disclosing his method, since my long term account is up more than 10 times in 3 years, by using his techniques.
My frequency of finding rockets has been about 2-3 in any rolling window of 6 months period, also average holding period is also 3-6 months per position. If you read him carefully you will find his selection criteria also includes -
1. Industry the stock is in
2. Earnings acceleration of the stock.
3. Also, the stocks that gave him big returns were not very well known at the time.
 
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