HOW I MADE 2 MILLION IN THE STOCK MARKET SUMMARY | NICOLAS DARVAS

Summary

In this video, the Norwegian Investor shares key takeaways from Nicholas Darvas' book, *How I Made $2,000,000 in the Stock Market*. Darvas, a self-taught investor, reveals his approach to stock trading, focusing on detachment from emotions, buying on strong trends and rising volumes, cutting losses early, and letting profits run. He also stresses the importance of keeping a stock logbook and staying independent of market noise. Through Darvas' strategies, viewers can learn how to make more disciplined, informed decisions in the stock market for long-term success.

Takeaways

• 😀 Kill your darlings: Don't become emotionally attached to your investments. Always remain impartial and ready to sell if in doubt.
• 😀 Buy on positive trends: Invest in stocks showing rising prices and increasing trading volumes, indicating the presence of strong growth potential.
• 😀 Use trailing stop-losses: Cut your losses early and let your winners run. Protect profits while minimizing risk through a systematic exit strategy.
• 😀 Don’t try to time the market perfectly: You cannot consistently predict stock tops. Let your stocks rise with the trend and exit using a trailing stop.
• 😀 Create a stock log book: Document reasons for buying and selling stocks. This helps you learn from mistakes and improve your investment decisions.
• 😀 Focus on earnings growth: Invest in companies showing signs of improved earnings potential, often associated with new industries or innovation.
• 😀 Be the lone wolf: Avoid being influenced by the opinions or rumors of others. Stick to your own strategy and make decisions based on facts, not emotions.
• 😀 Separate yourself from the herd: Successful investing requires you to stay detached from market hysteria and focus on long-term goals.
• 😀 Learn from your mistakes early: Making small mistakes early in your investing career is far less costly than making them later in life when larger amounts of money are at stake.
• 😀 Invest in stocks with a strong foundation: Before buying, ensure the company shows an upward trend in price and volume alongside fundamental growth drivers.

Q & A

What was Nicholas Darvas' primary achievement in the stock market?

Nicholas Darvas turned $10,000 into $2 million over 6.5 years through stock market trading, despite having no prior experience as a trader.

What does the phrase 'Kill your darlings' mean in the context of stock market investing?

'Kill your darlings' refers to the idea that investors should not become emotionally attached to any specific stock. A strong bias towards a stock can cloud judgment and lead to poor decision-making.

What is one piece of advice the speaker gives when in doubt about holding a stock?

When in doubt, sell the stock. By selling, you avoid further emotional attachment, and you can always repurchase the stock later if necessary.

How does Darvas suggest buying stocks based on trends?

Darvas recommends buying stocks when there is a clear positive trend and rising volumes. He emphasizes that buying into a rising market, even without knowing the underlying reasons, can yield good results.

What does Darvas mean by 'Buy high and sell higher'?

The phrase means that investors should aim to buy stocks when they are already on an upward trend, rather than trying to catch the bottom. The goal is to sell them at an even higher point.

Why is cutting losses early and letting winners run important in stock trading?

Cutting losses early prevents small losses from turning into big ones, while letting winners run allows you to maximize profits. The idea is to avoid the mistake of cutting profitable trades short while allowing losing trades to drag on.

How does a trailing stop-loss help in managing stock trades?

A trailing stop-loss automatically adjusts the sell price as the stock price rises. It ensures that you lock in profits as the stock goes up and helps you exit the trade if the stock starts to fall, protecting you from significant losses.

What is the 'Box Theory' and how does it work in stock trading?

The 'Box Theory' involves creating a 'box' around a stock's price range. If the stock moves into a higher box, it signals a buying opportunity. Stocks that move back into a lower box are sold. This strategy helped Darvas achieve a 900% gain on a Swedish stock in 2015.

Why is keeping a stock logbook important for an investor?

A logbook allows investors to track the reasons behind their buy and sell decisions. This helps them learn from mistakes, avoid repeating them, and improve their decision-making over time.

What is the significance of staying detached from the herd mentality in investing?

Staying detached from the herd allows investors to make rational decisions based on their own analysis, rather than following popular trends or reacting to market panic. Darvas stresses the importance of being a 'lone wolf' in the market, which he believes leads to greater success.