Book review Finance Recommended Read

Book Review | How I Made $2,000,000 In The Stock Market

Rating: 3.5 out of 4.

The first thing that strikes you about How I Made $2,000,000 In The Stock Market is its title. Who won’t like to know the secret of making $2 million? Written by Nicolas Darvas in 1960, the book chronicles his own tranformation from a naive investor into an astute craftsman.

Darvas was a professional dancer who until 1952 had only one expertise – dancing. He didn’t know anything about stock markets or investing.

It was only via a lucky stroke that he was introduced to the markets. However, that one little piece of investment piqued his interest so much that he decided to master the art of investing.

That said, How I made $2,000,000 in the stock market is certainly not a magic story. Darvas did not become successful overnight. It took him good six years to make his first big kill. In those six years, he absorbed several losses – a few of which drove him to near bankruptcy.

As Nassim Nicholas Taleb says, “Scars signal skin in the game,” Darvas also collected his fair share of scars before going to score a big one.

A dancer who thought he could play the markets

When Darvas started, he was all by himself. He had no teacher or mentor to turn to. But he never let the lack of knowledge become an obstacle and started reading financial publications and reports even during his trips.

His initial investments failed to produce any stellar outcomes and guess what the reason for his failures was? The same set of errors that hounds hundreds of thousands of retail investors to this day. Darvas was:

  • investing on hunches and hearsays
  • selling in panic
  • buying every other stock in the news. By his own admission, he owned 30 stocks at one time. Leave alone having a clue about their operations, he did not even know how to pronounce some of the names of those stocks.

It took me years to realize that when these financial tipsters advise the small operator to buy a stock, those professionals who have bought the stock much earlier on inside information are selling.

Nicolas Darvas

After having burnt his fingers, not once, not twice but one time too many, Darvas figured he must educate himself if he were to have a successful foray in stock markets.

Fundamental approach that didn’t work

Learning fundamental analysis was his first stab at educating himself.

He immersed himself in financial reports and started keeping records. So infallible was his faith in his studies that he even mortgaged his Las Vegas property to buy more of a particular stock.

But all his hopes of making a bonanza evaporated when that stock went into a nosedive. Darvas’ stint as a fundamental investor drove him to near-bankruptcy.

Technical approach that didn’t work either

The initial bruisings prompted Nicolas Darvas to contemplate what went wrong with his approach and why. He realized that his path to knowledge was still underdeveloped.

A few months later, he recalibrated his approach and parked his trust in technical action.

He observed that most stocks move in boxes of highs and lows. So if he could get in on a stock when it is breaking past its previous high, the chances are it could go on to make a new high and he could make money on it. This theory was later called Box Theory and is used by traders to this day.

Box theory in action (image credit:

While his technical skills did reduce his losses, but the wild success still evaded him. Stop-loss order became his primary weapon against incurring massive losses.

A hybrid theory that worked

When his tryst with technical action also didn’t turn out so well, Nicolas Darvas realized his theory, perhaps, wasn’t as watertight as he initially thought.

At this juncture, he devised a new, hybrid approach – he juxtaposed his box theory (technical) with fundamental analysis, hoping this new approach would end his condemnation as a peripheral investor.

If I have to summarize his entire techno-fundamentalist approach, he chose stocks –

  • whose prices were going up.
  • which were on the verge of breaking out of their old boxes and about to enter new ones.
  • with strong EPS potential.
  • which were forward-looking, which were making investments into the future.

He summarizes his position, “Buy high, sell higher.

Windfall and a near-ruin

His theory soon kicked into action. In 1957, he made his first big kill when he profited $250,000 from a stock. This also vindicated his techno-fundamentalist theory.

However, his triumph was soon followed by a great blunder.

Instead of applying his mind to find the next winners, he fell prey to get-rich-quick temptation.

His quest for finding potential multi-bagger stocks now centered on what market rumors were saying. He let herd instincts rule over his calm and calculative mind. He writes in rueful tone,

“My ears became my enemy.”

As a result, he lost almost $100,000 in a matter of few weeks. He gives a detailed account of the 15 stocks in which his lost money, calling it a Lunatic’s Chronicle.

The missing piece of the puzzle

After having driven himself to near ruin, Nicolas Darvas went back to the blackboard. He knew there was nothing wrong with his methodology, but it was his emotions that he had to have a firm control over.

How I made $2,000,000 in the stock market by Nicolas Darvas

The first thing he did to fix things was that he emotionally withdrew himself from his investments. If there was one thing that influenced him now, it was the stock price. Nothing else.

Second, he decided to go deaf to goings-on of the market until 6 PM every day. When his cables (telegrams) arrived in the evening, only then, would he start the day’s work.

Soon, Darvas recovered his losses and went on to book massive $2 million in profits. His painstaking efforts had finally paid off.

Rounding out of an autodidact

I found his dedication to hone his craft awe-inspiring. Mind you, the events in this book happened in 1950s. There was no Internet and Darvas was a professional dancer, always on the move. The way he stayed on top of things via regular cables from his brokers was ingenious.

Once he graduated into a more mature investor, he consciously narrowed his portfolio.

His game was to invest in 2-3 stocks which had just received an adrenaline shot and were moving up. After that, he would wait like an apex predator, watching the stock make the move North until it hit the proverbial inflection point.

Hence, there was a method to his madness.

In the interest of the reader, I want to make something very clear. Darvas was no ignoramus who stumbled upon stock markets and got plain lucky making $2 million.

He was a trained economist from the oldest and the largest university of Hungary, who immersed himself in the world of investing.


If you are a buy and hold, conservative investor, you may not agree with a lot of things in the book, especially, with the author’s mantra of ‘Buy high, Sell higher’. That said, there are many takeaways that you can benefit from, irrespective of the kind of investor you are.

The best aspect of How I made $2,000,000 in the Stock Market is that it’s so lucidly written.

Nicolas Darvas was a great story-teller. His writing skills were as majestic as his trading skills or dancing skills, for that matter.

Every chapter keeps you on tenterhooks and most chapters end on a cliffhanger leaving you hankering for more.

Did this theory work out? Did he make that big windfall? It’s like those Indiana Jones movies where the protagonist keeps hopping from one adventure to another.

I would sign off with a quote of his that I really loved.

“A stock is a champion as long as it behaves like one.” – Nicolas Darvas

Let me know your thoughts on this book review in the comments box below. If you liked it, please share it with your friends 🙂

How I made 2 million in the Stock Market book review

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    1. Yes, Mukesh, it’s a good read, it has withstood the trial of time. To answer your question, Darvas started with $10,000.

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