Skip to main content

Nicolas Darvas on stops: "no loss-free Nirvana"

I was just rereading Nicolas Darvas' How I Made $2,000,000 in the Stock Market and came across this interesting summary of his trading method and risk management approach in the author's intro. I'd like to share it with you.

Quoth Darvas: 

"I built a fortune with serenity by avoiding premature selling yet making an exodus from most of my stocks with the use of a single tool: the trailing stop-loss. 

I have discovered no loss-free Nirvana. But I have been able to limit my losses to less than 10 percent wherever possible. My stop loss method had two effects. It got me out of the wrong stock and into the right one."

Full passage in the image below:

Nicolas Darvas stops trading losses stocks


Sounds a bit like William O'Neil's philosophy on taking losses, doesn't it? Well, as O'Neil points out, his trading style and risk management philosophy was influenced by (among others) Nicolas Darvas and famed speculator and author, Gerald Loeb. Loeb advised speculators to cut all losses at 10% and he aimed to exit his own losing positions before they reached that mark. 

You will have losses at some point in your trading career. That is certain. This holds true for those saving and investing their own money in stocks and mutual funds/ETFs. Losses are an inevitable part of speculation. How you handle those losses (do you cut them quickly or let them run?) will make all the difference in your results.

We'll have more on controlling trading losses in a future post. In the meantime, check out Darvas' and O'Neil's books on trading. They will give you some serious food for thought on stock selection and risk management. If you take the time to read and apply their lessons, you may see some improvement in your trading (or "investing") results.

Popular posts from this blog

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

Jukebox

Tonight's jukebox is a blast back to the mid-1980's with a live in studio performance by New Order for BBC Radio 1. There are some very noticeable flubs in their performance (I think Bernard may have been feeling a little "rushed"), but the songs are amazing and it's like being an eyewitness to a studio rehearsal. An excellent video snapshot of one of the most inventive modern pop groups doing their thing. Enjoy, and thanks Adz! New Order, live 1984: "Sooner Than You Think" , "Age of Consent" , "Blue Monday" , "In a Lonely Place" , "Temptation" .