Here is a strategy which has similarities to Nicholas Darvas'
- Buy when stocks make new highs after a correction which follows a
prior sudden burst of volume and price movement from a prior
- Trade with stop orders only, whether to buy or to sell at a profit
or to cut losses.
- Place a trailing stop on a profitable move at a few percent below
the low of the current trading range.
- Buy only growth stocks showing the best potential for velocity of
- Buying candidates should offer goods or services that can be
anticipated to see tremendous demand and growth over the next 10
years. That doesn't mean the stock will be held for 10 years. It
gets sold the moment one of the trailing stops is touched off.
- Do not watch the intraday tape. Check price and volume action at the
end of the day or even better at the end of the week.
- Only watch very few leading stocks in leading industries. 5 stocks
should be the maximum at any given time.
- Always pyramid up only when a stock makes a move from a lower
trading range to a higher trading range.
- Hold no more than 2 stocks at any given time. You want to hold the
best stocks and if you can't make money on the best stocks, odds are
that you will not make money on others either.
- Start the first buy in any stock with a test buy of a small lot. If
the stock makes an initial clear move and then creates a trading
range on top of a prior trading range then pyramid up with buying
the main chunk.
- If your most recent buys all get stopped out then the market may not
be ripe for an entry.
- If your buy has not gone up in the next weeks after your entry, it
is probable that the stock is not going to make a significant move
in the near future either.
The successor system of the Darvas method
Under the millstones of the banks
Hoping for the trend and finding chaos
Above average? You will still lose!
The negative-sum game for investors