| What is the Darvas Trading Method? |
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| Written by Reece Mathews |
| Wednesday, 05 May 2010 13:14 |
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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?
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? There is no need to complicate the definition of this method. It is simply a trading system or a plan that traders can follow. Like any other plan, this one by Darvas gives rules on when to enter and exit a trade and what risk management guidelines to follow. There is a very good reason to apply this plan. When Darvas, who was originally a ballroom dancer, used it, he began raking in huge profits from the stock market. Starting with just $25,000, he was able to earn $2.2 million. In the 50s that was more than even expert traders could earn. 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. The popularity of the method is growing. This is because it is known to shell out good outcomes 50% of the time. It also offers the extra benefit of capital preservation. This means you can still lose some even if you follow the Darvas trading system but these losses are kept minimal. 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 an investor, you will not be wasting your time studying or even using methods that have already been proven to work. This can cut the time you need for system testing in more than half. You are also assured that you have a system that is effective for many fellow traders. You can apply Darvas' methods as they are. Be cautious though. Before anything else, it is crucial to check if his plan fits your trading style and preferences. Moreover, it has to match your money management guidelines or the level of risk you are willing to take. A very important aspect of stock trading systems is determining the risks that you are willing to take. There is no question that the Darvas method will work but do take the time to study it and find out if it is the perfect plan for you. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Want to find out more about the Darvas trading system? Visit http://www.nicolasdarvastrading.com. |