What Traders Can Learn From Nicolas Darvas
- Posted by admin on March 19th, 2010 filed in Finance
There is so much to gain from reading the history and methods of experts like Nicolas Darvas. For people who are wary about following trading gurus and experts, there is one good reason to look into this man’s techniques. Unlike other so called experts, this one, made $2 million out of just an initial $25 thousand investment. He did this while touring the world as a ballroom dancer.
How did he do it? The real story is a long one. It is, however, possible to arrive at the same level of success by looking into three vital trading lessons.
#1- Trading requires a plan.
Nicolas Darvas didn’t always trade successfully. There was a time when he encountered failures too and some of those times were when he went along with what felt good. He made trading decisions based on what others thought were hot items or based on what he felt was a good move.
Darvas later learned that trading should not be ruled by emotional decisions. Decisions should instead be ruled by a logical trading system or plan. A system will give you some measure of control over the very few aspects that you can manage in trading. Although you cannot tell the market where to move and up to what point, you can indicate when and where you will enter or leave a trade. You can also indicate yourexact money management rules.
#2- Don’t follow advice at the expense of solid research.
The Darvas trading system was born after significant losses caused by following too many pieces of advice. Although there are some experts worth listening to, always keep in mind that some opinions or tips may be biased or unsupported by facts. If you listen to a lot of third party inputs, you will also realize that many of them conflict with each other.
Instead of becoming a blind follower, take the lead by researching. Any decision that you should make about your trading system should be grounded on technical details and sound facts. If you absolutely think a piece of advice is sensible, take the time to check its factual basis.
#3- Don’t be afraid to claim ignorance.
The Darvas trading method became a reality because Darvas finally admitted his ignorance and started to ask questions. Just like Darvas, a trader’s natural inclination is to appear to be an authority and to pretend to be knowledgeable. This however can only lead to disaster. It is so much better to accept your limitations so you can go right ahead and look for the answers to the questions that matter.
These are only three of the many other valuable lessons that traders can pick up from Nicolas Darvas. Although it may not work for some to replicate Darvas’ exact methods, it does make sense to look at what he has accomplished so you can make your own custom system.
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