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Nicholas Darvas – Inventor of the Darvas Box

Last Updated on 11 September, 2023 by Samuelsson

Nicolas Darvas (1920 to 1977) was an author and self-taught investor famous for his book, “How I Made $2,000,000 in the Stock Market.” He was born in Hungary, a trained economist from the University of Budapest.

At his early stage in trading, he finds it difficult and often made losses. However, after some studies and experience in the market, he discovered his aha! Moment, the “Box Theory”. He believed that prices changes happen in a specific box pattern.

Darvas box, as it was called, is a technical pattern created by drawing horizontal lines across highs and lows. As you keep on drawing new lines along with highs and lows, you’ll see ascending and descending boxes. He advised only to trade ascending boxes and use the boxes that have been penetrated to place a stop-loss order.

After hitting the half a million dollars mark, Nicolas self-confidence rose to an ultimate level; he thought he has figured the market out and found the hidden secret. Nicolas traveled to different countries, analyzing and investing in the market, making millions of dollars. Furthermore, he increased his effort in the share market to make more money. Therefore, he started day trading. Nicolas Darvas day trading career began with him using the $160,000 he made from trading in the shares of E. L. Bruce Company.

At this particular period, He has completely immersed himself into day trading. He bought and sold shares frequently within minutes. He continued day trading on the shares of different companies, including American Motors, American Cables, Sharon steel, etc. Then later lost about $1,000,000 trading one of the companies.

The loss, he discovered it was as a result of his ears. Nicolas listened to the news and reacted to it, making his trading decisions based on what he heard in the report.

After the losses he experienced, Nicolas decided to trade only when there’s a clear opportunity in the market to earn him profit as his frequent trades made him more losses.

Day traders are faced with too much volatility; Nicolas realized that day trading is a tasking job that would require more screen time, spotting intraday trends and analyzing charts. But in following his box technique doing delivery-trading, it’d be possible for him to invest in share as well. So he quits day trading.

“I have no ego in the stock market,” he says. “If I make a mistake, I admit it immediately and get out fast.” Darvas thinks his system is the most conservative. Says he: “If you could play roulette with the assurance that whenever you bet $100, you could get out for $98 if you lost your bet, wouldn’t you call that good odds?”

Whenever he made a profit on a stock, he placed his stop-loss order just below the support region of the stock. Nicolas bought Universal Control stock when it was trading at 18, then later sold it when it was trading around 83 on the way down after reaching a high of 102. “I never bought a stock at the low or sold one at the high in my life,” Darvas once said. “I am satisfied to be along for most of the ride.”

Another great article about Nicholas Darvas: Nicolas Darvas – How I made $2,000,000 In The Stock Market | (Review And Summary)

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