Legal Disclaimer – Please Read Before Continuing. The information provided in this pdf is based on the author’s personal investing experience and provides a short-term Swing Trading method that was found to be effective by him. The information in How I Trade the Darvas Process is provided for educational purposes. How I Trade the Darvas Process author and affiliated people are not licensed investment advisors and none of the information contained here should be regarded or interpreted as investing advice. No trading/investing strategy, approach or investing vehicle provides a guarantee for success, and you are personally responsible for doing adequate research and making your own investment decisions. There are risks involved with investing and trading in the markets. You, the reader, are strongly advised to: A. Study the How I Trade the Darvas Process approach and seek independent advice before using this swing trading approach. B. Consider your financial obligations in determining whether using a short-term Swing Trading strategy is right for you. C. Only invest with money you can afford to lose — that which would not be detrimental to your lifestyle were you to lose it. Any profits or losses resulting from the reader’s decision to invest are his or her personal, singular responsibility and not that of the author or people affiliated with How I Trade the Darvas Process.
Let's Do This!!
How I Trade The Darvas Process “An insider with privileged information only has an advantage as long as he doesn't act on it. as soon as he acts on it the ticker will reveal his knowledge and he loses his advantage.” -Nicolas Darvas I have a few online brokerage accounts... I use Fidelity for this process. $7.95 commissions, great apps for the ipad , iphone & android and their customer service is incredible. You may use any broker that works well for You If You haven't read the book yet, Please do.... How I made $2,000,000 in the stock market from Nicolas Darvas The Only money you will need to spend on this process is around $20 one time fee for a great piece of software.... Everything else in this process is Free. Purchase Software Now Set Up Your Charts at Big Charts – It's Free …. Type in the stock symbol & click the advanced chart button Your big charts advanced chart settings are as followed.... 1. time frame: 1 year frequency: daily 2. Indicators Moving Average: sma 2-line 20 , 50 upper indicators: show earnings lower indicator 1: volume lower indicator 2: money flow lower indicator 3: RSI 3. chart style price display: candlestick chart background: default chart size: large 4. click draw chart then click store chart settings This process is very simple to apply using the tools given to you in this pdf. The first thing I do is see if the overall market is moving higher or lower.... I look for higher highs and higher lows.... If we are going lower, I sit on the sidelines.... If the overall markets are going higher, then I'm ready to apply my process as follows.
I go to Barchart.com top signal stocks. Free Website I look at the list and try to find one in my price range... I love the stocks between $5 & $22. From that list I will take 5-10 stocks and input the symbols into the software. I will then apply my criteria to the stocks. If any one of my criteria is NOT met I immediately throw the stock out and don't consider it at this time.... maybe in the future but not now.
Here is a list of my criteria for picking a stock. *** Pick stocks that are not covered by a lot of brokers yet and also stocks that don't have a lot of shares, that way any buying will elevate the stock at a rapid pace. 1. the 20 day moving average must be above the 50 day moving average. They must also be running parallel to each other pointing towards 1:00 & 2:00
2. 3. 4. 5.
the volume must be much higher than average the power ranking must be above a 5 in the software It must be a buy in the software highlighted with a green tab The stock must be near the high for the year (in other words when looking at the chart the prices to the left must be lower than the current price. 6. Earnings! Find out when they are – do not hold a stock into earnings. Wait on the sidelines until after they are announced. One never knows how a stock will trade during earnings season. 7. The stock should be involved in great new products or services that have room to grow. ie. A new ipad killer or new slimmer tv's etc.... (except in a few circumstances.... only buy stocks in developing industries.) 8. Set Your Stops!! 9. Stay away from bio pharma ‌. This is not a strategy for bio pharma stocks they are too speculative 10. My trading notes (trading diary or journal) are documented in Google Docs so I can access them anywhere
*** take notes in your diary why you bought a stock... if a trade goes against you then find out what you did wrong. sometimes stocks don't react well with this system remember them.
*** sudden rises in price and volume along with unusual relative strength and movement against the general market trend are all indications of a stock that is ready to take off.
here is an example of an ideal stock in an uptrend that may continue in the uptrend. The symbol is NTWK power ranking of 14.94 20 and 50 ma are positioned towards 1:00 and 2:00 they had earnings a week ago the volume bars are tall meaning higher than average volume is coming into the stock they deal with the software that runs the auto leasing loans, etc... they are expanding into China. With the economy set to rebound people will be buying cars, consumer confidence. Yada Yada Yada...
This stock is a possibility for me as you can see in the chart above my criteria has been met.... The stocks high for the day was $9.95... I know not to set a trigger on a whole number so $9.97 came to mind, but then I know $10 is a huge psychological number, therefore I set a conditional order to buy ½ of my position at $10.03. This means that Fidelity will only buy NTWK for me when the price rises above $10.03 per share. The following day the stock went as high as $9.97 then traded down for the rest of the day. Within the next few days the stock went as low as $8.85 I still had no position, but a box was forming. I was happy with my conditional order of $10.03... I knew if the stock went above $10.03 I would have half a position and the stock by going that high will form a new box. Half a position there and the other half when the stock makes a new box and breaks higher.
The box was formed between $8.70 & $9.90 ‌. My order was filled on Feb 22 2013 at $10.033 the stock closed at $10.59 for the day. I will hold this stock and see how it is trading, hoping it forms a new box so I can raise my stops to lock in profits. If the stock forms a new box I will set another conditional order for the other ½ of my position to be bought above the highest part of the new box. The price must clear the top of the box for me to feel comfortable that the trend is continuing. Along with high volume and high power rankings this stock should be a winner. This method has worked for me for years and continues to today. It is simple and to the point, I don't have to sit by my screens all day to be successful. In fact I do all my research between 7:30-8:00 pm a few days per week.
What Darvas has taught me is that computers are great - they make trading convenient, but there is a sense of information overload. Stocktwits.com yahoo groups and message boards, seeking alpha, motley fool, Jim Cramer, pointless newsletters and stock pickers, especially those scam artists running a school to �help� you become a better trader... I did them all... ALL NOISE!!!! Block it Out! If Darvas can do it, reviewing telegraphs and weekly charts, then anybody can do it with the correct tools. You now have the correct tools to do this the correct way. ( I am sure there are other tools to use, but these tools are what works for me) I think what Darvas did was miraculous, so many obstacles – I couldn't do it then, but I am doing it now with my computer, ipad & android phone.
How to draw a box.... 1. when the price of a rapidly rising stock reaches a resistance point that does not surpass for 3 or more consecutive sessions that point represents the top of the box. 2. if, after falling from the upper limit the stock reaches a downward resistance point which it does not break for 3 or more consecutive sessions, that level represents the bottom of the box. 3. the stop loss is determined when the stock falls 5% below the bottom of the box.
How to use the box.... 1. a stock is in a rising trend when it is in its top most box. as long as it remains there the stock fluctuations should be ignored and the stock is a hold. 2. if the price of the stock moves above the top most box then the stock is considered a buy. a 10% stop loss should be set on the first breakout. 3. having formed a new higher box , if the stock falls below the shaded area of this box then the stock is a sell. 4. there is no reason to hold or buy a stock if it is not in the top box.
Block Out The Noise No Email Lists No Twitter, Stocktwits or Facebook No Stock Picking Services No Schools & Seminars No Online Chat Rooms No Message Boards No Newsletters No Brokers No TV Shows
No Gurus It's Your Money Listen To Yourself ‌.. Not Them!