Nicolas Darvas – a famous Hungarian trader
Nicolas Darvas has earned the titles of dancer, self-taught investor, and book author over the course of his life. He is best known for his book “How I Made $2 Million in the Stock Market”.
After graduation, Darvas worked as an economist at the University of Budapest. Not wanting to stay in Hungary until the Nazis or the Soviet Union entered the country, he escaped in June 1943 at the age of 23 with a forged exit visa and fifty pounds to Istanbul. Some time later in Turkey he met his half-sister Julia, who became his dance partner.
In April 1953 they were already performing as part of a dance group with Judy Garland and Bob Hope. And in 1956 they began touring.
In his spare time he read about 200 books about the market and speculators, sometimes reading for up to eight hours a day. In fact, Darvas had two books which he read almost every week. These were Gerald M. Loeb’s The Battle for the Survival of Investment, published in 1935, and Humphrey Bancroft Neal’s Reading Tape and Market Tactics, 1931.
The start of Nicolas Darvas’ activities
He started out as an investor by investing in a couple of stocks. His investment proved successful and he subsequently sold them at a profit. He then developed an approach and planned to trade stocks, of which he made $2,450,000 in 18 months in 1957-58. During this period, the S&P 500 market rose 53 percent.
From then on, Darvas would only invest in stocks if they achieved significant growth on strong volumes and there was fundamental research on the company. Darvas claimed that his method often detected signs of insider trading before the company published favorable news.
His method of stock selection was called the “BOX theory.” He viewed a wave of stock prices as a series of boxes. When the stock price was boxed in, he waited. And he would buy when the price rose out of the box.
At the age of 39, after amassing his fortune and being exposed in Time magazine, Darvas chronicled his actions in the book “How I Made 2,000,000 in the Stock Market.” The book describes his “box system” that he used to buy and sell stocks.
Time magazine later reported that the New York attorney general “threw the book” at Darvas, claiming that his story was “completely false” and that he could find a “credible” profit of only $216,000. This action was the first ever under an expanded state law that prohibited fraud or misrepresentation in providing investment advice.
In an investigation dated January 13, 1961, Time reporters reported that the investigation was blocked by a court, which ruled that the investigation by Attorney General Louis J. Lefkowitz was an “unwarranted invasion of the free press.” Time also reported that state investigators acknowledged that they had failed to trace all of Darvas’ brokerage accounts.
