Nicolas Darvas Warned Us about This

by Darrin Donnelly on March 19, 2012

One of Nicolas Darvas’ essential lessons was to ignore the noise on Wall Street.

Darvas learned this lesson the hard way back in the 1950s, when he nearly lost everything he had by following the advice of those who claimed to be stock market experts.  I can only imagine what Darvas would’ve thought in this modern era of massive financial news, where we’re bombarded by market predictions and “hot tips” everywhere we look.

Today, the Wall Street noise Nicolas Darvas warned about is no longer limited to New York’s financial district.  It’s nearly impossible to avoid hearing someone on TV, radio, the Internet, in newspapers, in magazines, pretty much anywhere you look, offering their opinion on where the market is headed next.

And with the market roaring aggressively higher this year, these opinions are getting louder and louder.

As of Friday’s close, the NASDAQ completed its fifth-straight positive week.  Last week also marked the 10th positive week of the year, compared to just one negative week in 2012!

Obviously, this type of impressive run can’t continue forever.  Historical precedent tells us we’re due for a “pullback” or at least a “rest.”  When this rest will occur, how long it will last, and how strong it might be are the questions dominating headlines right now.

Such headlines are certainly doing their part in raising fear among some investors.

But while the financial news outlets are being flooded with talking heads weighing in on these questions, I learned long ago to stay out of the prediction game.

As Nicolas Darvas advised, you can’t let Wall Street noise cloud your judgment.  For every bear who loudly proclaims that the trend is about to end, you’ll easily find a bull telling you this Uptrend is only beginning.

Predictions are worthless.  They do nothing but cloud your judgment.

Your trading should be based on what ACTUALLY happens in the market, not on what you think MIGHT happen.

Why focus your time and energy trying to make futile predictions on what will happen next week or next month when the big money is made by simply analyzing current market movements and reacting to those movements?

This is what trend trading is all about.

Only when the Uptrend actually ends will it be time to shift into a defensive position.  Nobody, no matter how much of an “expert” they claim to be, knows for sure when that will happen.

Therefore, the goal right now is to ride this Uptrend as far as it takes us.

Ignore all the worthless predictions you’re hearing.  Focus on what the market is actually doing each day.  Stick with the few elite stocks that will give you the most bang for your buck and don’t get spooked out of these stocks until there is a true, technically-based reason to do so.

Fortunes are made not by chasing predictions, but by properly analyzing and reacting to market moves AS THEY OCCUR.

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