The lights go low at Manhattan's garish Latin Quarter nightclub. Onto
the stage glides a slim-hipped, broad-shouldered man in white tie and
tails. He grasps his partner, a stunning redhead in black tights,
whirls her over his head on one arm, hurls her dramatically in a
split-legged fall to the floor. The dance team is Nicholas Darvas and
his half-sister, Julia, one of the top acts in the U.S. What the tired
businessmen watching the show do not realize is that Hungarian-born
Nicholas Darvas, 39, is a better moneyman than most of them; he is a
top'stock-market speculator who has parlayed his considerable weekly
income into a fortune of more than $2,000,000. Monevman Darvas' methods would raise the eyebrows of most Wall
Streeters. Instead of studying what Wall Street calls the
fundamentals—price-earning ratios and dividends—he judges public
enthusiasm, a method that works best in volatile markets. “In my
dancing I know how to judge an audience,” he says. “It is instinctive.
The same way with the stock market. You have to find out what the
public wants and go along with it. You can't fight the tape, or the
public.” Mental Charts. Darvas' system is tailored to his job. Since he has to do
trading from wherever he is dancing he ignores tips, financial stories and brokers' letters, has
never been in a broker's office. Basically, his approach is that of a
chartist: he watches price and volume. But the only charts he keeps are
in his head. He studies the weekly stock tables in Barren's, receives a
nightly wire from his broker giving the high, low and closing of stocks
he is following, as well as the Dow-Jones averages. When a stock makes
a good advance on strong volume, he begins watching it, buys when he
feels that informed buyers are getting in. For example, when he was
playing in Calcutta, he noticed E. L. Bruce moving up in the stock
tables. Suddenly, on 35,000 shares it moved from 16 to 50. He bought in
at 51, though he knew nothing about the company, and “I didn't care
what they made.” He sold out at 171 six
weeks later. Darvas places his buy orders for levels that he considers breakout
points on the upside. At the same time, he places a stop-loss sell
order just below his buy order, so that if the stock does not move
straight up after he buys, he will be sold out and his loss cut. “I
have no ego in the stock market,” he says. “If I make a mistake I admit
it immediately and get out fast.” Darvas thinks his system is the
height of conservatism. Says he: “If you could play roulette with the
assurance that whenever you bet $100 you could get out for $98 if you
lost your bet, wouldn't you call that good odds?” If he has a big
profit in a stock, he puts the stop-loss order just below the level at
which a sliding stock should meet support. He bought Universal Controls
at 18, sold it at 83 on the way down after it had hit 102. “I never
bought a stock at the low or sold one at the high in my life,” says
Darvas. “I am satisfied to be along for most of the ride.”
