VIDEO COURSE

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The course consists of 10 chapters and a chart section that guide and enhance your discovery and learning from the required readings.

[REQUIRED] READINGS: "HOW I MADE $2,000,000 IN THE STOCK MARKET"

""How I Made $2,000,000 in the Stock Market" By Nicolas Darvas is the only book ever written by a rags to riches stock investor documenting every trade and process.   Most remarkable is that this work illustrates that what worked for the best stock investors in the 1950s still works today.   The amazing returns garnered by Mr. Darvas are derived from factors proven by financial academics at business schools including Harvard, Stanford, Duke, Chicago, UCLA, and Berkeley to name a few.  These key factors have been shown to resoundingly beat the stock market averages.  They include portfolio concentration, the post earnings announcement drift affect, momentum, trading volume, leverage, and risk management.

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ORDER REQUIRED TEXT FROM BOOKSTORE

CHAPTER 1: CANADIAN PERIOD

Synopsis:

In a bizarre twist of fate Nicolas Darvas is paid for his dance performance in Canada in Canadian stock. Canadian stocks are notorious for fraud. Even today the Canadian stock market is a dumping ground for operators that are too small to list across the U.S. exchanges. Nicolas Darvas becomes drawn to investment newsletters that make stock market speculation sound so urgent and easy. He never makes money on investment newsletter recommendations. He earns a windfall of $11,000 from 6,000 shares worth $3,000. By the end of the chapter it has dwindled to $5,800. Darvas tires of the Canadian stock market and sets his sights on America.

Main Point:

Stock market pundits are largely false stewards of your best interests. Pay close attention to the investment newsletter headlines from the 1950s. They were just as sensational and vacuous then as they are today. Notice how this intensifies the emotional favoritism that Nicolas has for certain recommended stocks.

Learning objectives:

Successful students will internalize the importance of independent thinking and emotionally detached clinical analysis with regard to stock investing. Nicolas Darvas is still very undisciplined in his thinking even at the end of this chapter. He is very dependent on the views of other investors and newsletter editors. This is, however, the very inception of his inkling that he must become an independent thinker or he will perish in the stock market.

ACTION TO TAKE:

CHAPTER 1 VIDEO AND AUDIO TRAINING

CHAPTER 2: ENTERING WALL STREET

Synopsis:

Nicolas Darvas moves his money to America to trade the U.S. stock market starting with $10,000. He subscribes to every financial publication he can including Barron's. He pays rating services Moody's, Fitch, and Standard & Poor's for information. He reads many books on the stock market. He subscribes to a stock service called Over-the-Counter Securities Review and starts hunting. His high frequency trading causes losses but he develops a code of conduct in not following advisory services, being cautious with broker information, ignoring Wall Street sayings, never trading "over-the-counter," ignoring rumors, and focusing on firms with fundamental strength. Main Point: Develop a code of market conduct for yourself. It may be exactly the same as that of Nicolas Darvas but make it your own. Do the hard study it takes to convince yourself what works in the market. Learn to be suspicious of opinions in any form.

Main Point:

Develop a code of market conduct for yourself.  It may be exactly the same as that of Nicolas Darvas but make it your own.  Do the hard study it takes to convince yourself what works in the market.  Learn to be suspicious of opinions in any form.

Learning Objectives:

Successful students managing money from an internally robust code of conduct will no longer be as erratic in their trading. Nicolas does not have as sound of a system as he thinks he does but he is moving in the right direction. At the end of a few years trading he will conclude that stock market success comes from a well planned trading system formulated from one's own trading efforts, careful study, and independent musings.

ACTION TO TAKE:

CHAPTER 2 VIDEO AND AUDIO TRAINING

CHAPTER 3: MY FIRST CRISIS

Synopsis:

The system allows Darvas to focus in on fewer stocks. He buy a very large position at a cost of $52,652.30. This sum is even larger in today dollars. The stock drops leaving him with $43,583.12 and depressed. The stock that saves him from disaster he knows nothing about. It simply rises.

Main Point:

Train your mind to focus solely on stocks that are rising now.  The good news is that this is very easy.   A half-wit can see upward movement on a price chart. This can be difficult when nobody is talking about a stock. In the summer of 2013 nobody was talking about Face Book (FB). It was trading in the 40s. How would you like to buy at that price today? You would have had to have had a lot of conviction. I started building a position then that led to a windfall of $50,845 in the last two days of February 2014. Trust me when I tell you that what you are learning actually works!

Learning Objectives: Successful students in learning to focus intently on rising price action will automatically cut a large majority of the loser stocks, tips, and recommendations out of the portfolio. This simple fact is very hard for people to grasp. They think that a falling stock is becoming a better deal. In their world of normal human interaction this is correct. Falling grocery prices are a good thing for consumers. This is not so in stocks.

ACTION TO TAKE:

CHAPTER 3 VIDEO AND AUDIO TRAINING

CHAPTER 4: DEVELOPING THE BOX THEORY

Synopsis:

Darvas becomes convinced that a purely technical approach to stock market investing is sound. Nicolas does not have price charts. Nicolas Darvas notices that prices consolidate for periods before continuing an uptrend. This is the beginning of his "box theory." He realizes that there is no sure thing in the stock market and becomes an impartial diagnostician reducing risks wherever possible. It is during this period that his four factor tool box forms: (1) Price and Volume, (2) Box Theory, (3) Automatic Buy-order combined with a (4) Stop-loss Sell-order.

Main Point:

Develop an unemotional systematic approach to trading. Nicolas Darvas succeeded when he developed a system of 4 tools that allowed him to enter and exit any stock trade with a minimum of risk. This allowed him to be very precise and controlled in each stock he traded.

Learning Objectives:

Successful students will develop a system of entry and exit orders combined with simple price and volume signals. My friend Van Tharp, Ph.D. told me one day that in a conversation with Ed Seykota that Ed spent 30 minutes explaining a simple Donchian moving average crossover strategy that had made him tens of millions in the market. It then took Ed three full days just to get people to take action. The problem with the vast majority of stock investors is not that they lack the ability to understand the markets, it is their lack of ability to take action.

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CHAPTER 4 VIDEO AND AUDIO TRAINING

CHAPTER 5: CABLES ROUND THE WORLD

Synopsis:

Nicolas signs a contract for a two year world tour of dance. He identifies Barron's as the weekly publication to use to identify "any stocks which might be moving up." This focuses him on just a few stocks. He also comes to realize that he cannot apply a mechanical relationship between the stock averages and any single stock except for a general bullish or bearish backdrop for all stocks. He notices that some stocks are calm and others are jumpy or even dangerous. Most importantly he realizes that he could become a diagnostician but never a prophet. Many times his educated guesses turned out wrong throughout his trading career. He becomes a non-gambler in the market.

Main Point:

Embrace a backward looking approach to trading. You can only make probabilistic statements about the future. Nothing is certain in this universe of order and chaos. Chaos, however, is a large part of trading. Nobody has a crystal ball. You will have many of your guesses, no matter how educated, proven wrong in the market. Be constantly aware of how to reduce this omnipresent risk for stock investors.

Learning Objectives:

Successful students will begin to focus on just a few stocks. This is much more important then you now realize if you won a lot of single stocks. The importance will become clear over time after you study this course.

ACTION TO TAKE:

CHAPTER 5 VIDEO AND AUDIO TRAINING

CHAPTER 6: DURING THE BABY-BEAR MARKET

Synopsis:

Darvas notices that some stocks resist a down trending market. He discovers upon closer examination that these are firms with sharply increasing earnings. When melded with volume and trend analysis he develops what he calls techno-fundamentalist theory. This theory is a mish-mash of a variety of factors known to beat the market. 1. Stop loss orders. 2. Price trends. 3. Volume increases. 4. Earnings strength. Lastly he finds 5 stocks that fulfill each of these 5 criteria and are "of not much interest to anybody. "

Main Point:

Stocks are slaves to earnings power and the best bets are hidden gems. But if you know what you are doing you can find great stocks. This is done the same way that a well studied and organized Geologist goes about finding gems. Businesses that do not earn a real profit go bankrupt at some point in time in our modern economy. That is why the dot com bubble burst so completely. The best stocks of all are ones that are rising on volume with strong earnings BUT NOBODY IS TALKING ABOUT THEM! This is especially true when it is a relatively new company where everybody is using their products. Amazon, Google, Yahoo, Costco, Wal-Mart and each big stock you can think of in our market today went through a phase where the numbers, volumes, and price trends were strong but nobody was discussing them in the media.

Learning Objectives:

Successful students will become more concerned with earnings and less concerned with popularity. The ability to purchase a stock that nobody is talking about is very rare in our economy. The investors who make the highest returns are able to invest without social validation. Do you think you can go against the grain? If you can't, stop here and simply invest 100% of your retirement accounts in an indexed stock fund. Just move to cash when indexes go into a major crash. Many millionaires have been made from indexed mutual funds alone. Warren Buffet recommends them as the best for most investors. That's because he knows how few people can actually think independently. You don't have near the upward potential of investing in a handful of good stocks. But you don' t have as much risk of ruin either. Keep studying if your goal is to get as rich as possible in the stock market.

ACTION TO TAKE:

CHAPTER 6 VIDEO AND AUDIO TRAINING

CHAPTER 7: THE THEORY STARTS WORKING

Synopsis:

Lorillard and Diners Club rise out of their consolidation zones as per theory. As it turns out the unusual volume and price rise in E.L. Bruce presaged takeover activity by rival Edward Gilbert. Bruce is the first really explosive move Darvas fishes himself into.

Main Point:

No insider who knows will ever tell you when a stock will explode upwards. If you choose to become a professional trader of the stock market you will live like a market ascetic to succeed. None of your usual social interactions will help in any way with your stock investing. It is only in deep solitude and intense study that you will see with clarity which stock are primed for a rise. Even then you will almost certainly be wrong on at least 40% of your single stock selections. That means that 4 out of 6 single stock investment selections will be wrong.

Learning Objectives:

Successful students will vicariously experience what it is like to invest in a stock before the rise and subsequently to experience a windfall. There is a very special door that every great trader must cross. That door is to another realm of independent thinking. It is only through independent thinking that you can develop the conviction to take and hold onto a serious position in a rising stock. Some days it will feel as if you have bound yourself to the wheel of a sailing ship in a typhoon. But don't fret. If you can steer the course you will have glorious days of calm and profitable sailing ahead as you steer profitably through the stock market.

ACTION TO TAKE:

CHAPTER 7 VIDEO AND AUDIO TRAINING

CHAPTER 8: MY FIRST HALF-MILLION

Synopsis:

Darvas makes $325,000 in nine months. But he has also known of many stock investors who made big money in nine months and lost it in nine weeks. He withdraws half of his capital from the market. He eyes the remainder with caution. He uses the equivalent of options at the time. Rights are now called warrants. Warrants differed very little from call options. The increased leverage allows him to control a very large 12,000 share position split between two stocks rising fast on strong volume.

Main Point:

Nicolas Darvas is cautious at times yet quickly becomes aggressive when conditions suggest that the general market and his selected stocks are rising. The ability to hammer the throttle when right in a strong market and hit the brakes when wrong or in a weak market takes great determination, study, and practice.

Learning Objectives:

Successful students will begin to visualize alternative scenarios under which trading is cautious or aggressive. As your investment accounts increase in size the daily gains and losses increase except when in cash. Options increase daily gains and losses 3 to 6 times further. High account volatility is marvelous when your positions are working for you. These same fluctuations are lethal when against your positions. Cash is your brake. Selling out of shares through a stop limit order or liquidating an option position based on a penetrated price level are both examples of slowing losses by converting to cash.

ACTION TO TAKE:

CHAPTER 8 VIDEO AND AUDIO TRAINING

CHAPTER 9: MY SECOND CRISIS

Synopsis:

The total capital Nicolas now controls is about a half a million dollars. Darvas returns to New York and visits a major brokerage. He becomes highly influenced by all of the buzz about stocks. This induces over-trading. He begins losing on tips and gossip. But the three positions he set up based solely on his techno-fundamentalist theory become largely profitable. His large positions in Universal Controls and Thiokol save him from his wild stock buying frenzy. He makes a firm decision to shun any form of gossip about the stock market. The string of bad losses pushes him over the edge. He becomes irrevocably independent in his thinking.

Main Point:

Successful stock investors shield their minds from the opinions of others. The only way to truly see stocks as they are is through clinical analysis. The only way to perform clinical analysis is to honestly asses the facts about a stock with no distortion. Wall Street does not like this particular lesson. If you truly followed this advice you would not invest as frequently. If all investors became independent thinkers overnight Wall Street would have no suckers to dump stock on. Learning Objectives: Successful students will begin to double check earnings, volume and price trend after hearing or reading a stock top. You will first notice that you don't feel as interested to buy a new stock somebody recommends. Over time you simply won't care. In fact if you are really methodical, like me, you won't even look at the stocks most people are talking about. You will have already rejected these stocks based on your own clinical analysis.

ACTION TO TAKE:

CHAPTER 9 VIDEO AND AUDIO TRAINING

CHAPTER 10: TWO MILLION DOLLARS

Synopsis:

Nicolas Darvas carefully filters all incoming information. His broker can only contact him after market close. He strips the financial newspapers of any financial stories or commentaries. His system allows him to make more on his winning trades than he loses when he is wrong. As his trading capital increases he has to be more careful with his stock selection. His profit on Thiokol alone is $862,031.52. By sticking to his system faithfully he becomes a millionaire as his stop losses protect and enrich. He crosses the finish line a multi-millionaire feeling like a runner who has trained strenuously and suffered many defeats, and now trots to victory.

Main Point:

News in any form is rubbish unless it is a verifiable numerical variable of volume, trend, earnings, or channel width. This goes severely against the grain of Wall Street. The Investor's Business Daily, The Wall Street Journal, and hundreds of investment newsletters earn millions of dollars per month selling information to retail traders who rarely think for themselves. The insight that made Darvas rich creates independent thinking retail stock investors who find very low value in the financial news.

Learning Objectives:

Successful students will become insular stock investors. If you experience the results that I have (Doc Brown) you too will change. Your trading will simply focus on the same directly measurable four factors Darvas did; volume, trend, earnings, and channel. You will become disinterested in discussing stocks with others or impressing anybody with your vast stock market knowledge. In short, you will become quiet, reserved, and boring in your stock investing. Yet despite your new found boringness at cocktail parties you will notice that you make a lot more money in the stock market than anybody you know. This is exactly what Warren Buffett meant when he wrote, "Many commentators are fond of saying that the small investor has no chance in a market now dominated by the erratic behavior of the big boys. This conclusion is dead wrong: Such markets are ideal for any investor — small or large — so long as he sticks to his investment knitting. Volatility caused by money managers who speculate irrationally with huge sums will offer the true investor more chances to make intelligent investment moves."

ACTION TO TAKE:

CHAPTER 10 VIDEO AND AUDIO TRAINING

APPENDIX: CHARTS

Synopsis:

These charts are absolutely amazing time capsules. They allow us to see price charts from over 5 decades into the past. What is fascinating is that you can find clear examples of one or two such chart patterns in bullish years of the stock market.

Main Point:

There is nothing new in the stock market. The same price patterns that are making a small percentage of stock investors rapidly rich today have been in the stock market as far back as the Tontine Coffee Shop that evolved into the New York Stock Exchange. The patterns were likely the same all the way back to the first stock traded in the Dutch East India Company in 1602.

Learning Objectives:

Successful students will focus on factors known to increase stock returns. It takes a great deal of resolve to critically assess any trading strategy. It take even more conviction to hold a large position on a rising stock. When you finish this course you will understand the need for that conviction. But you will not have it until you have traded for a few years to a decade. Darvas was a fast learner. It took longer for me.

-Doc Brown "I can never thank you proper for the blessing this class is to me." -Harold Jones

ACTION TO TAKE:

CHARTS VIDEO AND AUDIO TRAINING