Plenty of erroneous myths have worked their way onto Wall Street.

Mottos and maxims are as much a part of Wall Street culture as stock charts and annual reports.  But regardless of whether these well-known sayings originated in a classic book, a popular movie, or hard-won trader experience, not all of them are true.

Here are five fairly common stock market clichés that are simply NOT true.  A wise trader can exploit these five MYTHS and profit from them.

Myth No. 1: Monday Sets the Tone for the Week

This is one of those sayings repeated constantly on news programs, usually at the beginning or end of a Monday session.  Yet, there’s really no truth to it.  In fact, Mondays are one of the most erratic days of the week for the stock market.

In my own experience, I’ve found that breakouts tend to have a higher failure rate if they occur on a Monday.  This is likely due to the fact that just as the “smart money” tends to act later in the day, it also tends to act more aggressively later in the week.  Therefore, late-week moves are a much better indicator of market conviction than early-week moves.

The Lesson: Consider making much lighter entries on Monday.  If you’re a short-term trader, consider avoiding entries altogether on Monday.

Myth No. 2: Times are Changing Fast and the “Old Ways” Won’t Work Anymore

Every few weeks, you’ll see some market guru on TV explaining why the old methods of investing or trading won’t work anymore.  It just so happens that most of these “experts” are usually trying to sell you their services, which offer you the keys to their “new” way to trade.

Yes, the stock market is a constantly-changing animal, but at its core the more it changes, the more it stays the same.

Discount brokers, program trading, ETFs, high-frequency trading, etc. have all changed the way the stock market works, but none of it really changes what the stock market is.

Ultimately, the stock market is one big speculation machine based on the emotions and opinions of individuals.  That will NEVER change.  And that’s why tried-and-true methods of the past (ranging from value investing to trend following to momentum swing trading) will always work if executed properly.

The Lesson: Find a method with a proven track record and stick with it, regardless of what you hear self-proclaimed “experts” say.

Myth No. 3: The “Little Guy” Can’t Beat the Market

It’s amazing that this myth is so easily accepted.  Despite the fact that money managers have a notoriously poor track record when it comes to beating the stock market, again and again we hear that the “little guy” doesn’t stand a chance against the “pros.”

Interestingly, Peter Lynch, the mutual fund manager with history’s best track record in beating the market, has actually written books proclaiming not only that the “little guy” can beat the market on his own, but that it’s EASIER for him to do so!

Remember, the massive marketing campaigns by financial companies are geared at doing everything they possibly can to convince you, the lowly amateur investor, that you can’t play this game and that you need to hand over your money to them.  They promise to take care of you.  Unfortunately for these companies, their track records often prove otherwise.

The Lesson: While it’s certainly not easy, someone who is truly committed to beating the market CAN do so.  It takes a lot of hard work, but it can be done.  In many ways, the “little guy” actually has a tremendous advantage over the large fund manager.

Myth No. 4: News Moves the Market

Every day after the market closes, news outlets will conclude that the day’s action – whether up or down – was due to some newsworthy event.  The fact is, on any given day, “good news” or “bad news” has little impact on the market.

A strong bull market will completely ignore “bad news” (remember the ‘80s?).  A bad bear market will continue to blow off even the most optimistic news items.

News does not move the market, emotion does.  In particular, fear and greed cause the market to move the way it does each day.

The Lesson: Ignore the news and follow the trend.

Myth No. 5: It Doesn’t Matter When You Enter, As Long As You’re on the Right Side of the Trend

This is an idea that’s been picking up steam in trend-following circles over the past several years.  It’s based on the principle that proper risk management will keep you out of trouble even if you were to enter the market completely at random.

The concept, in theory, is correct.  If you’re always operating with a 2-to-1 or better reward-to-risk ratio, hypothetically you’ll never get into too much trouble if every random trade has a 50-50 chance of being successful for you.  The problem is that not every trade has a 50-50 success rate, especially if you’re entering randomly and depending on a 2-to-1 reward-to-risk long-term outcome.

Plus, the objective of trading isn’t to stay out of trouble; the goal is to make a life-changing amount of money!

The Lesson: Your buy point is absolutely crucial to the success of your trading.  Buying at the wrong time will whittle away at your portfolio, no matter how well you’ve managed your risk.

These are just five well known stock market myths that are simply not true.  Don’t accept anything to be true just because you hear it often enough, especially when it comes to the stock market.

Do your homework and learn to separate the facts from the fiction.  Doing so will not only keep you from following the erroneous advice that everyone else is following, but it will also present you with tremendous profit opportunities.

* Looking for a stress-free way to trade with a long track record?  Learn to trade the Darvas System with a risk-free 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO and my FREE trading course by clicking here.

How to Eliminate Trader Stress

Trader.  Stress.

The two words have become forever linked to each other, largely due to the stereotypical image of what a trader is and how a trader acts.

You know the stereotype.  The 20-something testosterone-fueled Alpha Male who sucks down a Red Bull every 15 minutes and lives off adrenaline.  His days are spent maniacally screaming and bullying his way through Wall Street trading rooms while his nights are spent partying ‘till dawn.

Of course, this exaggerated stereotype is hardly realistic of what a successful trader behaves like.  In fact, it’s probably the complete opposite of how a successful trader acts in reality.  Successful traders are more likely to work in calm, quiet settings (often from a home office) and live a typical family life in Suburbia, U.S.A.

Still, erroneous stereotype or not, “trader stress” is a very real problem.  Anyone who has ever tried their hand at trading (especially trading for a living) knows all too well what a tremendous level of stress trading can induce.  It’s a level unmatched by just about every other profession in terms of intensity and consistency – that is, it hits hard and last long.

The good news is, stress doesn’t have to be a part of trading.  There are very real ways to defeat trader stress.  And when you do, your performance as a trader and happiness as a person will improve dramatically.

I suppose every trader who has been in this game long enough has come up with some type of formula for slaying the trader-stress dragon.  Here are my five simple steps, which have helped me eliminate trader stress.  If I ever find myself stressed out by the market, I can go back to these five steps and determine precisely which step or two I’m ignoring.  I then correctly implement the step I’m ignoring and I’m a new man.

Step 1: Set Stops

I know, I know, Step 1 isn’t exactly groundbreaking.  We all know how important it is to trade with predetermined steps.  Stops are like safety nets for the tightrope walker, insurance plans for your property, or [insert your cliché of choice here].

Yes, the importance of setting stops comes directly from Trading 101, but you’d be amazed how many people violate this first commandment of trading.  Many a trader will keep their stop vague, fluctuating with the market or their mood.  They will usually move their stop as their position nears it, defeating the whole point of having a stop in the first place.

Whether your stops are mental or pre-programmed orders, they need to be EXACT and they need to be IRONCLAD.  No vagary and no bailing on them at the last minute.

Step 2: Visualize Your Worst Case Scenario

For traders, the “worst case scenario” at any given moment is having a position turn against them and hit their stop.  When this actually happens, it’s really not that big of a deal.  You either book your profits or cut your losses.  Either way, you close the trade and move on to the next.

Like most things in life, the ANTICIPATION of this so-called “worst case scenario” is much worse than the actuality of it occurring.

Each morning, you should visualize “what if” the market goes against you today and your stops get hit.

By doing this consistently, you’ll remind yourself it’s really not that big of a deal to close out a trade.   Thus, on a day when it actually happens, you’ll be able to deal with it without panicking or stressing out.

Now I know some of you will see this step as an exercise in negativity.  After all, aren’t we all taught by the volumes of self-help literature that we need to visualize only positive things occurring?

To that I say, get real.  There’s no room on Wall Street for fairy tale thinking.  The same is true of most professions.  Do I want a surgeon to operate on me who hasn’t mentally prepared himself for worst case scenarios?

Mentally prepare for the worst.  You’ll find that it not only helps you make better decisions in the heat of the moment, but it also drastically reduces your stress in “surprise” situations.

Step 3: Make Peace With What You Can’t Control

The root of all stress is fear of what we can’t control.  And let’s be honest, there’s a lot in life we have very little control over.

The key to reducing stress is to make peace with the things we have no control over and focusing our efforts on those things we truly do have control over.  You may have no control over a specific event, but you always have control over how you react to that event.

In trading, you have NO control over what the market does.  Accept that.  Make peace with that.

You’re like the surfer who can’t force the ocean to give you the wave you want.  But, you can choose to be patient and ride the perfect waves when they come along.

As a trader, the ONLY thing you can control is how disciplined you are in your entries and exits.  That’s it.

If you have the discipline to exit a trade as soon as a stop is hit, you’ve WON on that trade – regardless of whether the trade itself made you money or lost you money.  You’ve won because you made the correct choice and reacted properly.

Step 4: Remember That All Good Trades Must Come To An End

Nobody exits at the very top.

When a stop gets hit, it usually means you’re exiting with less profit than you would have made if you had exited the day before.  That’s how trading works.  Live with it and expect it.

You can’t be surprised and confused to see a trade come to an end.  Would a firefighter be good at his job if every time the fire alarm rang he got surprised and angry?

Step 5: Relax And Enjoy The Ride

Life is all about choices.  As a trader, you CAN choose whether or not to be stressed out when you trade.

The stereotype about how stressful trading is doesn’t have to be true.  The choice is completely up to you.

Some traders make stress and anger a central part of the game.  They feed off of it.  They enjoy it or think it’s “just the way it is.”

But other traders are calm and relaxed.  They enjoy the fact that they have the opportunity to make a fortune playing what is ultimately a mental game with other willing participants.

The difference isn’t about one’s personality; it’s about one’s choices.

You can trade in a state of stress and anxiety or you can trade in a relaxed state.  But make no mistake about it, the choice IS yours.

* Looking for a stress-free way to trade?  Learn to trade the Darvas System with a risk-free 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO and my FREE trading course by clicking here.

Why do people who are hugely successful in one career end up failing miserably as traders?

My trading hero, Nicolas Darvas, succeeded in several other fields besides trading, but his case is an extremely rare exception.  The much more likely scenario is for someone to confidently enter the trading world after finding success in other areas, only to whittle away at the fortune they made.

Why is that?  After all, there are universal principles that make one successful and we therefore tend to assume that success in one area will more than likely translate to success in another area.  But in trading, this logical assumption fails much more often than it proves right.

I think the reason for this is due to a fundamental difference in what it takes to succeed in trading compared to other professions.

To be a successful in almost any field, you have to be extremely productive.

Whether you’re a writer, athlete, teacher, salesman, doctor, entrepreneur, CEO, just about any career you can think of, the level of your success is dependent on how productive you are; how much value you add to the finished product.  Your goal is simply to produce more of something or a better version of something.

However, for a trader, there is no product to produce.  Our finished “product” is the amount of money in our account at the end of the day and we make that money by making smarter decisions, period.

The inability to truly comprehend this simple fact (and its implications) is why so many people fail at trading.

People enter the trading world eager to multiply the money they’ve earned from their other career.  However, the crucial skill (productivity) that helped them earn all that money outside of trading doesn’t translate to success as a trader.

The reasons are obvious.  You can’t force a winning trade the way you can force yourself to finish a task.  You can’t create more winning trades the way you create more widgets for your company.  You can’t fix or improve a trade the way you fix or improve the product or person you were hired to fix.

New traders rarely adapt well to this fundamental difference.  The most common response to a dwindling trading account is to change the trading system.

It’s easy to see why this is such a common response.  In other careers, where all success hinges on production, if something isn’t working, we continuously make changes until the final product is working the way we want it to.

But in trading, constantly tweaking our strategies is a recipe for disaster because we’re not building a final product.  Put another way, we can’t force the market to behave exactly the way we want it to.

Successful trading is about reading and reacting, not changing and creating.  It’s about coming to terms with the fact that we have very little control – actually, none whatsoever – over what opportunities the market will give us on any given day.

And that brings us to perhaps the biggest problem of them all: most people CAN’T STAND the idea of not being able to control something.

In our technology-obsessed world, we hate the idea of not having control so much that we often delude ourselves into thinking that we do have control over things we don’t.  (Come to think of it, that may be why The Secret, a book that promised to reveal how you can control every single aspect of your life with the power of your thoughts, recently sold more than 20 million copies.)

The sooner you accept the fact that you can’t control the market and change it to your will, the sooner you will be on the path to successful trading.

Ultimately, successful trading is all about substituting one fundamental key to success – that is, productivity – for a different one: DISCIPLINE.

* Looking for a highly-disciplined system that takes the stress out of trading?  Learn to trade the Darvas System with a risk-free 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO and my FREE trading course by clicking here.

Traders can learn a lot from college basketball's Final Four.

Nicolas Darvas described himself as a “techno-fundamentalist.”

He based his trading strategy on a combination of BOTH technical analysis and fundamental analysis.  This reliance on both types of analysis separated Darvas from many trend traders, back then and still today.

Some trend traders rely exclusively on technical analysis and disregard the fundamentals.  They believe that every fundamental that can be known about a stock – past earnings, projected earnings, market direction, market outlook, etc. – is already reflected in the actual price of the stock.

This reasoning seems logical.  However, I think the viewpoint misses something key.

Yes, the technicals ARE more important than the fundamentals to a trend trader.  That is, no matter how great the fundamentals look, if the technicals are poor, the stock needs to be avoided.  You can’t “force” the technicals to match up with the fundamentals no matter how much you think (or hope) they should.

However, traders who have learned to properly recognize trends and technical patterns can take their success rate to a much higher level when they add fundamental analysis to their repertoire.

Since the NCAA basketball tournament’s Final Four will take place on Saturday and Monday, allow me to offer the following analogy.

Every year in the tournament of 68 teams, there are a few “Cinderella” teams who pull off upsets and advance further into the tourney than anyone expected.  This is a great story in the world of sports and everyone starts pulling for these Cinderella teams who overcome the odds stacked against them.

But why are the odds stacked against such teams in the first place?  After all, they play by the same rules as all the other teams.  They only play five players at a time.  They’re not allowed to foul or double-dribble or travel.  They usually have the exact same number of scholarship players as every other team.  And on and on this list of similarities goes…

With this in mind, what makes their success such a surprise?  The entire NCAA field of teams must play by the same rules and those rules are specifically put in place to give everyone an equally fair chance at success.

Obviously, what makes an underdog an underdog is the talent, tradition, and resources these Cinderella teams appear to lack.

They don’t have top-rated recruiting classes and an elite level of talent (both players and coaches) compared to the major programs.  They don’t enter the tournament with a long tradition of success like programs such as Kansas and Kentucky have.  They don’t have the big budgets that upper-echelon programs like Ohio State and Louisville have.

A team’s talent level, tradition, and budget are similar to a stock’s fundamentals.

For instance, the talent a team has could be compared to the earnings a company has.  A team’s tradition could be compared to a company’s recent economic condition.  A team’s budget could be compared to a company’s financial stability and future growth prospects.

Now obviously, some of these Cinderella teams get hot.  They get on a winning “trend” and ride their momentum to unexpected victories.

However, these types of winning trends are much less likely to be continued (or repeated) compared to a team that has the superior “fundamentals” of talent, tradition, and budget.

Cinderella stories make for great sports moments, but if you were a betting man with equal odds on two teams, you’d be a fool to bet against the team with much better fundamentals – no matter what kind of winning streak (or winning “trend”) the team with much weaker fundamentals had been on.

Of course, when the fundamentals ARE very similar between two teams, you’d bet on the team that was riding the winning trend into the game.

It’s the same thing with the stocks you choose to trade.

Sure, there are going to be stocks that achieve explosive gains and look great technically despite having lousy fundamentals.  But these stocks are few and far between.

The bottom line is this: stocks with better fundamentals have a much higher likelihood of advancing on a long and successful trend than those with weaker fundamentals.  Put simply, the odds are stacked in favor of those companies with better fundamentals.

When you come across a stock with great fundamentals AND great technicals, you’ve entered that rare “techno-fundamentalist” territory Nicolas Darvas talked about.

This is exactly what we’re looking for as Darvas traders.

* Learn to trade the Darvas System with a RISK-FREE 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO by clicking here.

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.

* Learn to trade the Darvas System with a risk-free 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO by clicking here.

Nicolas Darvas on Wall Street in 1959.

What is it about Nicolas Darvas’ story that has made it so endearing over the last 50-plus years?

His first book, How I Made $2,000,000 in the Stock Market, is considered a Wall Street classic and his subsequent books remain brisk sellers decades after they were written.  Why do these books continue to captivate traders of all skill levels so many years later?

Obviously, there is an inspirational factor to it.  When someone overcomes incredible odds and does the seemingly impossible – in this case, turning just over $30,000 into $2.25 million in less than two years – it certainly excites and motivates us all.  It reminds us of the enormous potential the stock market holds if the stars align just right.

But the stock market has a long history of such “rags-to-riches” stories.   These tales inspire us, for sure, but they don’t continue to captivate us decades later the way Darvas’ story has.

So what is it?  What makes Nicolas Darvas go beyond the mere subject of an inspirational true story to a Wall Street legend whose teachings continue to educate and fascinate us several decades later?  What makes Darvas and his writings so timeless?

I believe it’s Darvas’ folk-hero status among independent traders that makes him so compelling to this day.   Here was a guy whose success in the stock market was fueled largely by his anger at the Wall Street establishment.  He felt the game was rigged against him and was determined to beat the Street on his own.

Nicolas Darvas was most certainly not a member of the Wall Street “insider club.”  He had no Ivy League education, he didn’t grow up in the bucket shops honing his trading techniques, and he had no wealthy mentor to guide him through the jungle of stock market speculation.  In fact, Nicolas Darvas stumbled into the stock market purely by accident at the age of 31 when he, working as a ballroom dancer, was paid by a nightclub owner in stock instead of cash.

By pure luck, the value of that initial investment nearly tripled in two months and from that point on, Darvas was hooked by the wealth potential offered by the stock market.

However, as is often the case with beginner’s luck, the blessing soon turned into what felt like a curse as Darvas spent the next four years losing his money by following all the mainstream Wall Street advice.

Some of Nicolas Darvas’ mistakes were his own fault.  He trusted the “tips” he got from wealthy acquaintances.  He overtraded, feverishly entering and exiting stocks, sometimes holding 25-30 stocks at a time.  He tried to “get rich quick” by focusing on highly-speculative penny stocks.

After learning these harsh beginner mistakes, Darvas acknowledged that he needed help from the Wall Street pros.

It was during this period that Darvas realized most of these so-called professionals weren’t any more successful than anyone else trying to make it in the market.  In some cases, they were downright fraudulent in taking advantage of “average Joe” traders like Darvas.

Nicolas Darvas tried numerous financial advisory services and “professional” newsletters, only to find that they were often involved in “pump and dump” strategies.  That is, they would buy a penny stock, tout that stock in their newsletters in order to give it a big boost, and then sell those stocks immediately, booking a fast profit.  The vast majority of the newsletter’s readers, people like Darvas, were left buying into a recommended stock just as it was peaking and then being forced to sell it for a steep loss.

Darvas didn’t have a much better experience with advice from the professional brokerage firms he worked with.  He found that these brokers could give endless high-finance-sounding reasons for why a stock should go up, but that rarely ever translated to a stock actually going up.

Darvas became convinced that the “Wall Street pros” took advantage of the small-time investors like himself.  He felt taken advantage of by these “insiders” who seemed to be the only people getting rich on Wall Street – at the expense of regular people like Darvas.

This type of sentiment towards the Wall Street institutions sounds alarmingly familiar to what we hear today, doesn’t it?

Fueled by anger at the Wall Street establishment, Nicolas Darvas decided he had to start acting in his own self-interest.  Wall Street could not be trusted.  If Darvas was going to beat this game, he’d have to think for himself.

This conclusion led Darvas to create his own strategy, a powerful method known as the Darvas System, which eventually made him a multi-millionaire.

Darvas never let go of his anger towards Wall Street.  His second book, Wall Street: The Other Las Vegas, was perhaps his most aggressive attack on the Wall Street establishment.

The powerful Wall Street machine fought back, of course.  They banned his books, attacked his credibility, and even went so far as to outlaw his recommended stop-loss method on the American Stock Exchange!

But Nicolas Darvas never backed down.  He’d continue to call out Wall Street in each of his books.  He’d continue to fight for the individual trader and expose some of the more questionable methods employed by the major Wall Street firms and financial advisors.

Today, some of the methods Darvas spoke out against have been outlawed or at least regulated.  However, when we see headlines about insider trading scandals, Ponzi schemes, pump-and-dump scams, etc., we can’t help but feel like we’re all being taken advantage of by Wall Street’s “good ol’ boy network.”  We can’t help but feel, like Darvas did, that there is an insider network designed to keep the very few on the inside rich at the expense of the vast majority who are locked out of it.

Nicolas Darvas fought for the individual trader.  And he never stopped fighting.  He never stopped ringing the bell on the fraud and deceit that often went unchecked on Wall Street.

That, more than anything else, is why I think Nicolas Darvas remains a hero to the individual trader and why his message continues to be so popular, several decades later.

* Learn to trade the Darvas System with a risk-free 30-day trial subscription to Darvas Trader PRO.  Each issue of Darvas Trader PRO includes our updated portfolio and watchlist of current Darvas Stocks – with EXACT buy points and sell points.  You can instantly download the latest issue of Darvas Trader PRO by clicking here.