A Part-Time Trader's $2 Million Secret
Think your life is too crazy to devote enough time and energy to the stock market?
Today you’re going to see how a busy 1950s showman made $2 million in the stock market trading part-time. More importantly, you’re going to see how you can benefit from the lessons he learned…
In the early 1950s, this young man from Hungary finally got his big break.
Along with his half-sister, he performed in a dance number with Bob Hope and Judy Garland. That appearance helped ignite what would become a very successful career in show business. By 1956, the duo became one of the most popular dance acts in the world.
He also became one of the most successful amateur investors of his generation — while being a full-time professional dancer…
I know that might sound bizarre. But hear me out. If a guy who sashays around the world for a living can carve out his own piece of stock market history, there’s no reason we can’t learn from him. So for your Monday strategy session, I’m going to tell you the quick and dirty version of this man’s story. Then, I’ll show you the techniques he used to mint his fortune.
The guy I’m talking about is Nicolas Darvas. As a young college graduate, he escaped Hungary with a forged visa during World War II. Putting his degree in economics to good use, Darvas began to dabble in the market in the early 1950s — right when his dance career was taking off.
But he didn’t mint his millions until 1957, when he was a world away from Wall Street.
Here’s how he did it…
Darvas spent considerable time perfecting what he called his “box theory.” Essentially, he would track a stock’s weekly movements and record (or “box”) the trading range. He would buy names that interested him when they successfully broke out above his boxes.
The technique Darvas used is very similar to other early forms of stock charting. Keep in mind this was the 1950s, long before stock charts were readily available at the push of a button on your computer. If you wanted to chart the price of a stock, you had to do it yourself.
News also moved slower in the 50s. And since Darvas’ dancing career kept him overseas for years at a time, he was consistently behind on the financial headlines.
Darvas actually credits his distance from Wall Street for much of his success. During his travels with his dance troupe, he relied on his broker to mail him copies of Barron’s so he could keep up with his stocks. Then he would send telegrams from his hotel when he wanted to buy or sell a position. Not exactly the same as logging onto your online broker and hitting the “buy” button, eh?
Because he was overseas, Darvas wouldn’t receive his newspapers until they were already out of date. The news was stale by the time it got to him — so he ignored it. This allowed him to focus on his box theory without the distraction of the news cycle influencing his thought process.
By isolating himself from the financial news, Darvas was able to grow his brokerage account to more than $2 million in less than two years.
But here’s the kicker…
When Darvas eventually returned to New York, he was not able to replicate his results. Word of his success has spread. And his constant contact with newspapers, brokers, and other investors took its toll. He simply couldn’t execute his trading system with the distraction of endless financial news and stock tips.
To regain his edge, Darvas again isolated himself from the Wall Street crowd. He quit reading the news again — and even went so far as to have his broker tear out the weekly stock prices in Barron’s to send to him. That way, he wouldn’t be tempted to read any news items about his potential trades.
The experiment worked, and Darvas went on to write several books about his trading experience, most notably How I Made $2,000,000 in the Stock Market.
It’s a fascinating story and a great read — one that still applies to you, even in the age of the internet, smart phones and instant news and information.
To recap, Darvas used three main techniques to succeed at trading:
1. He followed a simple system
Darvas utilized a simple breakout system to enter new trades. Once he developed his system, he didn’t deviate from it (except when he made the mistake of getting too close to Wall Street). Even though he had to maintain his own charts, Darvas was able to pursue his career while trading successfully part time.
2. Slow and steady wins the race
Darvas didn’t try to beat the Wall Street sprinters at their own game. He knew he could not execute quick trades from across the globe, so he made sure to tailor his system to work within his limitations. If Darvas were alive and trading today, I doubt he would concern himself with high frequency traders or the social media rumor mill…
3. Ignorance is bliss
When it came to his trades, Darvas refused to let the financial media or Wall Street analysts influence his decision-making process. These days, it’s all too easy to allow yourself to get bombarded with too much irrelevant information. Darvas learned firsthand the danger of being too reliant on other’s opinions…
Follow these simple rules and you could be looking at the same kind of success Darvas enjoyed. But just because they’re simple doesn’t mean they’re easy. There are just way too many distractions out there.
But if a full-time showman can make millions in stocks trading part-time, why can’t you?