I had to use what would become known as the darvas technique to determine when to take profits. I realized that I would not be able to sell at the top. Anyone
who claims he can consistently do this is lying. If I sold while the stock was rising, it would be a pure guess, because I could not know how far an advance might carry. This would be no cleverer a guess than anticipating that "My Fair Lady" would end its run after 200 performances. You could also guess it would go off after 300 or 400 performances. Why did it not go off at any of these figures? Because the producer would be a fool to close the show when he sees the theater full every night. It is only when he starts to notice empty seats that he considers closing the show.
I carried the Broadway comparison through to the problem of selling and applied it to my darvas technique. I would be a fool to sell a stock as long as it keeps advancing. When to sell then? Why, when the boxes started to go into reverse! According to the darvas technique, when the pyramids started to tumble downwards, that was the time to close the show and sell out. My trailing stop-loss, which I moved up behind the rising price of the stock, should take care of this automatically, using the darvas technique.
Having made these decisions, I then sat back and re-defined my objectives in the stock market for applying the darvas technique:
1. Right stocks
2. Right timing
3. Small losses
4. Big profits
I examined my weapons:
1. Price and volume
2. Box theory
3. Automatic buy-order
4. Stop-loss sell-order
5. darvas technique
As to my basic strategy, I decided I would always do follow the darvas technique: I would just jog along with an upward trend, trailing my stoploss insurance behind me. As the trend continued, I would buy more. When the trend reversed? I would run like a thief.
I realized that there were a great many snags. There was bound to be a lot of guesswork in the darvas technique. My estimate that I would be right half of the time could be optimistic. But at last I saw my problem more clearly than ever. I knew that I had to adopt a cold, unemotional attitude toward stocks; that I must not fall in love with them when they rose and I must not get angry when they fell; that there are no such animals as good or bad stocks. There are only rising and falling stocks - and I should hold the rising ones and sell those that fall according to the darvas technique.
I knew that to properly follow the darvas technique I had to achieve something much more difficult than anything before. I had to bring my emotions - fear, hope and greed - under complete control. I had no doubt that this would require a great amount of self-discipline, but I felt like a man who knew a room could be lit up and was fumbling for the switches.
article is actually only a small snippet of Nicolas
Original Method Of Nicolas Darvas... The Young Dancer
Turned Investor Who, Within 18 Months, Turned $25,000
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