| Two revered traders share their ideas on | | | | Darvas methods for professional trading which is |
| professional trading, namely the Darvas method and | | | | shortening, looking for a six month high and adding in |
| full-time trading. A key consideration discussed is how | | | | my own money management. That's all I've done, |
| important it is to prepare yourself before you begin | | | | just based a lot of it on Van Tharp.The next |
| full-time trading. | | | | question is: I'd like to know your thoughts on this. |
| David: We have a question: the original Darvas looks | | | | What is the best trading method to be a full-time |
| at the one year high, the modification version looks | | | | trader that earns a living - intra day trading, swing |
| at the six month high. Why is this? Why not three | | | | trading or position trading? |
| months, why not five months. You told us you also | | | | Stuart: It all comes back to the individual. A lot of |
| use Darvas method with some modifications - would | | | | people aren't suited to short term intra day day |
| you like to share? | | | | trading because they just don't have the tolerance to |
| The Darvas method is pretty much looking for | | | | risk and the temperament to ride out volatility and |
| stocks that are trading at a twelve month high, and | | | | things that move quickly. So far as the potential for |
| then looking at those already trading high, marking | | | | return, it all comes back to the risk. The greater risk |
| the top of the current band of volatility and when | | | | you take on in the instrument you are using in |
| the stock breaks through that high, it's almost making | | | | professional trading, the greater potential for profit. |
| a new high. That's considered the buy signal. With the | | | | So far as a full-time approach, I'm not going to be |
| modifications, I know Daryl Guppy has done a bit of | | | | one that sits at the screen and sits at my desk for |
| research into his methods, and a lot of the | | | | six hours and watches the numbers. I know a few |
| modifications have come from the work he has done. | | | | people who trade the foreign exchange and do it for |
| The reason I think it has shifted from a twelve | | | | a living. They'll watch for a few hours, but beyond |
| month high to a six month high has more to do with | | | | that, that is their day done. |
| changing market conditions. At the moment, markets | | | | For those trading more medium term which is |
| are a little bit more volatile than they have been in | | | | certainly possible, you can still do that with leverage, |
| the past. I think by having a shorter timeframe, | | | | whether it be options or CFDs and the like. |
| you're going to get more candidates reaching that | | | | The idea of full-time implies you're deriving all your |
| criterion. | | | | income from it, but it doesn't take full time. For |
| Why not three? I don't think six is a magic number. | | | | medium term trading, you may commit an hour a |
| When you go down to three, that may not be as | | | | day, and after that your work is done. |
| effective because it is such a shorter timeframe. | | | | To put yourself in a position to be able to do that |
| Darvas was all about momentum trading and buying | | | | does take time. It's not as if you have never traded |
| into already established trends and then riding that | | | | before and stop work on Friday and then start |
| trend out. With three month trends, the trend hasn't | | | | trading full-time on Monday. But when you have put |
| really confirmed that it is a good stable trend yet. | | | | in the time to do that, professional trading almost |
| Concerning the modifications I've personally made to | | | | becomes effortless because you do follow systems |
| the Darvas method. I just use some of the modern | | | | you put in place and follow a routine. |