How I Made $2 Million in the Stock Market

"I was the perfect pattern of the optimistic, clueless small operator who plunges repeatedly in and out of the market." Initial struggles.

"I was the perfect pattern of the optimistic, clueless small operator who plunges repeatedly in and out of the market." Initial struggles. Darvas began his stock market journey with little knowledge, making impulsive decisions based on tips and rumors. He invested in Canadian penny stocks and suffered numerous losses. These early experiences taught him the importance of education and caution in the stock market. Learning process. Through trial and error, Darvas realized the futility of relying on hot tips and unfounded advice. He began to develop his own system, starting with small investments and gradually increasing his positions as he gained confidence and experience. This approach allowed him to learn from his mistakes without risking significant capital.

"I decided that if I studied price action and volume, discarding all other factors, I could get positive results." The box theory. Darvas developed his "box theory" by observing stock price movements. He noticed that stocks tend to move within defined price ranges, which he called "boxes." When a stock broke out of its current box and established a new, higher range, it signaled a potential buying opportunity. Volume analysis. In addition to price action, Darvas paid close attention to trading volume. Sudden increases in volume, especially when accompanied by price increases, indicated growing interest in a stock and potential for further gains. This combination of price and volume analysis formed the core of his technical approach.

"I had to bring my emotions—fear, hope and greed—under complete control." Emotional detachment. Darvas recognized that emotions were often the downfall of many investors. He worked to develop a detached, clinical approach to trading, treating it as a business rather than a gamble. Disciplined execution. By sticking to his system and avoiding impulsive decisions, Darvas was able to maintain consistency in his trading. This discipline helped him avoid common pitfalls such as selling too early due to fear or holding onto losing positions due to hope.

"I decided to give 'on-stop' orders to buy at a certain figure with an automatic 'stop-loss' order on them in case the stock went down." Automatic risk management. Darvas implemented stop-loss orders as a key component of his strategy. These orders automatically sold a stock if it fell below a predetermined price, limiting potential losses. Preserving capital. By consistently using stop-loss orders, Darvas ensured that no single trade could significantly deplete his capital. This approach allowed him to stay in the market and capitalize on future opportunities, even if some trades didn't work out as expected.