Gradually, I began to understand that I could not apply mechanical standards
to the relationship between my Average and individual stock
market investment. Judging this relationship was much more like
an art. In some ways it was like painting. An artist puts colors
on a canvas obeying certain principles, but it would be impossible
for him to explain how he does it. In the same way I found that
the relationship between my Average and my individual stock market
investment is confined within certain principles, but they could
not be measured exactly.
From then on, I made up my mind to keep watching the Dow Jones Industrial Average, but only in order to determine whether I was in a strong or a weak market. This I did because I realized that a general market cycle influences almost every stock market investment. The main cycles like a bear or a bull market usually creep into the majority of them.
Now that I was armed with a finishing touch to my stock market investment theory, I felt much stronger. I felt as though I was beginning to touch some of the light switches that would illuminate the room.
I discovered I could form an opinion on a stock market investment from the telegrams in front of me. They became like X-rays to me. To the uninitiated, an X-ray picture is meaningless. But to a physician, it often contains all the information he wants to know. He relates its findings to the nature and duration of the illness, the age of the patient, etc., and only then does he draw his conclusions.
I did this automatically without deeper analysis. I could not fully explain this to myself until I realized that I was now reading and no longer spelling out the alphabet. I was doing what an educated adult does - I could absorb the printed page at a glance and draw rapid conclusions about my stock market investment, instead of painfully putting the letters together like a child.
Simultaneously, I tried to train my emotions. I worked it this way: Whenever
I bought into a stock market investment, I wrote down my reason
for doing so. I did the same when I sold it. Whenever a trade ended
with a loss, I wrote down the reason I thought caused it. Then I
tried not to repeat the same mistake for another stock
market investment. This is how one of my tables looked:
These cause-of-error tables helped me immeasurably. As I drew them up one after the other I was learning something from each stock market investment. I started to see that stocks have characters just like people. This is not so illogical, because they faithfully reflect the character of the people who buy and sell each stock market investment.
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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