“How I Made $2,000,000 in the Stock Market” by Nicholas Darvas tells the story of a man who was incredibly successful in the stock market in the 1950s. Most people who read the book come away excited to draw “boxes” around the stock graphs, waiting to “buy the breakout”. Much of William J. O’Neill’s (of “Investor’s Business Daily” fame) patterns and methods of watching, buying, and selling stocks come from this type of analysis.
But when I read the book, I came away with something different, and something not a lot of people catch. Avoid TMI, or “too much information”. You see, Mr. Darvas was a famous ballroom dancer, and traveled the world doing such. And his success story happened decades ago, when telegrams were the norm for quick communication, nor emails, texts, and apps.
You see, he had his broker express mail him a copy of the weekly “Barron’s” magazine, which at that time listed stock quotes as of Friday’s close, with high/low and volume data for the week, like a newspaper lists such for the day now. He did his decisions and analysis from this paper, which not only was once-a-week, but often several days old by the time he obtained it. Yet he was still amazingly successful, without having access to Level-3 quotes, stochastics, MACD, and other such tick-by-tick stock price analyses.
He didn’t NEED such immediate, and I would go so far to say trivial, information to make his purchases. While he wasn’t looking to buy a stock to hold for decades, he wasn’t looking to day-trade a stock either. And the data he received was just fine for him.
I had an old boss who pretty much lived the stock market, and analyzed charts to the finest detail. He was successful when he had a few minutes here and there to look at the market, as he had a busy full-time job. Well, he left one company and went to another. He received a nice severance upon leaving the first job, and about six weeks between gigs. He took his severance and wiped it out trading during that six weeks. Why? Because he had more time to do more research and make more trades and do more analysis. And it cost him.
Another issue I will briefly mention is “paralysis by analysis”. I knew another gentleman who was analyzing all of the options available for subscribing to a streaming service – Netflix, Hulu, etc. Well, he wound up comparing them so much and to such detail that he never could make up his mind. And his poor wife just wanted to watch something good on TV!
In short, don’t believe that you need access to every bit of information available, or, more importantly, that having access to such will make you a more successful trader. It may actually wind up doing the opposite. Trust your gut sometimes, don’t do everything in full, dollar-cost-average, etc. These will make you successful in the long haul.
DECADES to Wealth 