With fixed commissions, the cost of trading, on a per-share basis, declined rapidly as the price of the stock increased. While this was of no concern to the buy-and-hold investor, Darvas realized that a significant part of his trading profits would be lost to commissions if he was not careful. Modern day investors can look at stock price as a filter indicating that the company has some stability—very low-priced stocks often stay low for fundamental reasons in today's markets. Armed with his list of trading candidates, Darvas watched for a sign that the stock was ready to move.
The only indicator he used was volume , watching for heavy volume among his short list of trading candidates. He was looking for stocks trading within a narrow price range, which he defined using a set of precise rules. The upper limit was the highest price a stock reached in the current advance that was not penetrated for at least three consecutive days.
The lower limit was a new three-day low that held for at least three consecutive days. After spotting the range, he would cable his broker with a buy order just above the top of the trading range and a stop-loss order just below the bottom of the range.
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Once in a position, he trailed his stop based on the action in the stock. Each time a new box formation was completed, Darvas raised his stop to a fraction below the new bottom of the new trading range.
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In trading, a picture is worth a thousand words, and we can look at an example from Darvas' book to gain a clearer understanding of his method. He began following the stock closely by asking his broker to begin providing daily quotes. He identified Lorillard's industry and learned that it was selling a lot of Kent and Old Gold cigarettes. While not a technology stock, cigarettes were a growth industry at this time, before the U.
Surgeon General warning appeared on every pack. Unfortunately, his stop at 26 was hit a few days later when the stock price went back into the box. Continued strength after the drop in February led to another purchase of shares at By comparison, the Dow Jones Industrial Average gained about 7. Spotting high volume breakouts is relatively simple to do, and profits like Darvas made are possible if traders apply his disciplined approach.
Much of Nicholas Darvas' success stems from his confidence in his trading strategy. He became proficient at managing risk and taking his profit off the table before the position had the chance to reverse. All orders are dispatched as swiftly as possible! Buy with confidence!. Seller Inventory Simply Brit: We have dispatched from our UK warehouse books of good condition to over 1 million satisfied customers worldwide. We are committed to providing you with a reliable and efficient service at all times. Condition: Very Good.
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Book Description - -. This book is in very good condition and will be shipped within 24 hours of ordering. The only good thing was that I did not take intra-day trades. I went back to reading and scanned the net in search of answers. The key to trading, I realised was risk management.
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I had to keep my losses small. Since then I moved from trading in the futures market to cash market to keep risk within a manageable limit.
Even in the cash market, I avoid trading in frontline stocks as the effort needed to move a frontline stock is very high. Once I got my act in place, recovery was fast. I managed to post a percent in the next 11 months. I still trade on the same strategy and same risk management and have managed to take my trading book to eight figures. A: I continue to have an end-of-the-day strategy but there are more nuances added to it.
Most of my work is done on weekends or post-market which requires a min of scanning through my selected list of stocks. If there is an entry signal I place my bid in the morning and leave it. During the day I do not watch the markets. I now run a restaurant where I spend most of my time during the day. So what I essentially do is shortlist stocks which are within 20 percent of their 52 week high.
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This then goes into a list which I monitor every day for to see how they are behaving. What I am looking for in these stocks is a contraction in volatility. A type of coiling of a spring. Say if a stock has gone to and then corrected to 80, the next level it touches is 90 and then 85 after which it has to touch This is a stock which goes into my next basket which I call the 'ready to take action' stocks. After three contractions in price, I am ready to strike at the breakout. I have a standard stop loss of 7 percent from my entry price.
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This level has been arrived based on my experience. I have noticed that a strong stock does not go below the 7 percent mark. I look for companies which have a low float as they give a good trending move. A turnaround company which has moved from losses to profit or those which have a strong sales and profit growth generally show up in this list.
I normally do not look at fundamentals but if these criteria are fulfilled I increase my position. I normally risk 1 percent of my capital on each trade but in these cases where there is a strong fundamental I increase it to 1. At any point, I do not take a position in more than five stocks.
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If there is capital to spare I would look to enter in an existing position rather than in a new one. A: My re-entry signal comes at the moment the stocks is above 10 percent from my entry price. Here two things happen. The first is my stop loss is moved to my entry price. I take the risk off my capital.
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Second is I observe the stock closely. If it is consolidating after rising by 10 percent from my entry price and doing so for days I look to re-enter at the breakout. The important thing is the consolidation should last for not more than 7 days.