A Review of How I Made $2,000,000 in the Stock Market

This book is interesting not only because Darvas describes his box method in it, but also because Darvas describes how he traded before he developed the system. It is a good read even if you don't practice box theory.

Overall Impression

Overall, I found this book engaging and informative. Personally, those six magical pages have given me plenty to think about, and have even made me a few bucks. The edition of the book that I have linked to contains an appendix wherein Darvas describes in more detail some of the finer points of the box theory (such as how exactly to identify the box top and bottom, and where and when to place stop loss orders).

The Book Itself

The book is a fairly quick read. It is divided into four distinct sections: The Gambler, The Fundamentalist, The Technician, and The Techno-Fundamentalist. Each section details a phase of Darvas' career as a speculator of stocks. As a whole, the style is fluid and the book flows quite well. It is structured so that each chapter leads into the next. Personally, I found it difficult to put down the first time I read it. Perhaps that was because many of the bad habits he talked about fit me to a T at the time I read it.

The tone of the book is that of a self-deprecating character. It's as if Darvas was letting us in on some scret, but was somewhat embarrassed about it. Not sure if Darvas overexaggerates his naivete during the early years, or if he really was that much of a sucker.

Darvas begins by relaying an anecdote about his first foray into stocks in a company called Brilund. Astute readers will note that on Page 8 of this famous book, Darvas describes what amounts to a de facto put option: He was guaranteed a minimum selling price of 50 cents on Brilund! But I digress...

Right from the outset in The Gambler, one understands that Darvas was a complete novice at stock trading. As such, he fell prey to many of the classic problems that befall such people: relying on rumors, tips from brokers and acquaintences, becoming emotionally attached to the stock, etc. Fortunately, Darvas learned quickly to move beyond such drivel.

Darvas: From Novice to Master

In the Fundamentalist section, Darvas recounts his attempts at studying balance sheets, earnings reports, etc. for thousands of companies. Darvas the early fundamentalist was over-trading, constantly getting in and out of stocks, on the premise that ‘you cannot go broke making a profit.’ As he notes, of course you can. He also writes that oftentimes, financial publications contradicted themselves regularly (e.g., one would say buy ABC while another says sell ABC). I believe this statement applies even today.

In the Technician part of the book, Darvas vaguely describes his box theory. In my copy of the book the discussion starts on Page 51 and culminates on Page 56 with four cardinal rules of thumb. I am not sure if Darvas was intentional in his brevity, but one gets the feeling that, while he wanted to describe the theory, he did not want others to know precisely what he did. This could also have been unintentionally left out. This is quite possible - a man who writes about a subject dear to him often leaves out details that he deems unimportant, even if such details are crucial to its understanding.

In six magical pages, Darvas spawned an entire cottage industry. Looking around the web, there are plenty of websites that claim to have finally interpreted the Darvas box method correctly, and will share it with you for a nominal fee. In all seriousness, how much detail can someone put into six pages? Even if Darvas weren't vague, I doubt he could have written down all the intricacies of his complex system in only six pages. It is true that throughout the book, he refines the concept more, but the gist of his system is explained in just those six pages. Amazing!

In the Techno-Fundamentalist section, Darvas goes into great detail about his rise and fall and subsequent rise again. This part has a bit of melodrama in it that I believe is a result of Darvas' writing style, as he often spoke in analogies. Also in this section, Darvas discusses how he used the box theory method to locate potential stocks to purchase, but only did so when the fundamentals warranted it. In some ways his ideas resemble those espoused in William O'Neil's book. O'Neil certainly had more details in his book. I have found that combining the techniques from both books have yielded good results.