The $2.25 Million Darvas Trading Principles

In 1959, Nicolas Darvas beat Wall Street when he traded his way from $30,000 to $2.25 million in 18 months.  He did this while traveling around the world on a dance tour, while using telegrams for end of day prices, and a weekly Barron’s Magazine. How is this possible?

His ten powerful principles:

1. He traded the long side aggressively, with individual stocks in bull markets.
2. He never traded the short side.
3. He set a stop loss on every trade at a price level that proved he was wrong.
4. He let his winners run as far as they would go without a target.
5. He used trailing stops to exit with profits on strong reversals.
6. Darvas avoided intra-day price noise; he didn’t even watch it during market hours.
7. He searched for stocks that were under accumulation with higher prices on increasing volume.
8. He based his decisions to buy new stocks, and move  trailing stops, while the market was closed.
9. He traded price action and not his own opinions or predictions.
10. He only wanted to buy what was going up with momentum, consistently making new highs.

Nicolas Darvas was a trend following trader back in 1959, and discovered the principles that would later be used by other legends like Ed Seykota, Dan Zanger, and Tom Basso. They used these principles years later to make millions in the market. These are powerful principles that can be used by different types of traders, on many time frames, with great success.