Sunday, November 10, 2013

Book Sharing: Nicolas Darvas - How I Made $2,000,000 in the Stock Market

This is not a book review since there are many sites and youtube video (like this) which does a better job than I can.

This must be the only book that I managed to finish reading within 1 day, while seating on the floor of the library. This is an easy read and I found the methods to be simple to understand (though it might be difficult to implement it), it is the Darvas box system.

Nicolas Darvas was a dancer and while he was traveling around the world performing, he was able to make himself a cool 2 mil using nothing but price action. He did not have the latest information and only asked his broker to send him the closing price of the day. In some way I think his method might be similar to a points and figures plot (something that I will be learning as well).

I think that the Darvas box is not strictly a TA (technical analysis) but might contain some elements of economic as well, in the sense that he was looking for up and coming business, product or industry.

Well, at this point I am not sure whether his method is usable in the Singapore market, also doing back-testing might not be all that useful since some break-out usually end up either higher or lower. But my purpose for back testing will be to observe how price and volume will differ between industry. 

In the meantime, it seems like the latest US economic data points to better recovery and it might be something that the Feb will consider whether to reduce their bond buying policy. Well, this is a good opportunity for those of use who believed this to start positioning ourselves. 

For me, I am starting to buy into short term bond fund, with short duration of 3-12 months. The reason being that when the easy money ends, cost of borrowing (i.e. interest rate) will rise. So for bonds that offered a lower yield, their price will have to fall in order to compensate holder for the higher interest rate. By holding onto short duration bond, the fund can benefit from buying into the higher yield bonds and the loss of capital via price change might not be so severely affected.  

Well, that is all for me and I would welcome comments from readers on how you are positioning yourself for the eventual reduction of the Feb QE program. 

Thank you for reading.

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