Nicholas Darvas’ created one of the most profitable trend trading methods of all time. His method evolved through years of trial and error, and has been fine tuned into clear, concise, and effective trading system. What makes his method so effective is that his rules are straight forward, and leave no room for judgment calls, or emotional bias, protecting traders from themselves. And it’s easy to use.

But this simplicity can also be the Nicholas Darvas method’s biggest weakness, because it’s also really easy to misuse it too. Many traders have discovered Darvas’ methods and have tried to emulate his success, but few have succeeded. My research has shown that the common element among those who have failed is that they have not followed the Darvas method as precisely as they should.

Trading Darvas’ method, just like any other system, takes discipline. At times you may be tempted to second guess your system. You may choose to hold onto a position too long or sell a position too short. This is where the majority of traders go wrong. Trading profitably really is a matter of discipline. The truth is that if you don’t have the discipline to follow your rules, you don’t really have a system at all. And you likely don’t have many profits.

Discipline is where most traders find their difficulties, but it doesn’t have to be that way. Darvas set several “operational” rules for himself to ensure that he would stick to his system, to what he knew worked, and most of all allow his tools to do their job. While few of us have the luxury of being able to isolate ourselves in a room at the Plaza Hotel, there are other steps that can be taken to shore up discipline and make use of Darvas’ example.

One such step is backtesting and practice. Darvas developed and refined his method with historical data and then practiced it when he had the opportunity. This built his confidence and his “feel” to such a degree that sticking to his system became second nature. Now, Darvas did not have access to computers or such tools as the Trading System Analyzer to evaluate his system. He had to do everything by hand with pencil and paper. Now that we have such resources, we can easily analyze and refine our systems, thus building confidence and discipline in a much easier manner that Darvas was afforded.

With discipline in mind, your next step should be to write a set of rules you can follow, and that will become your personal trading plan.

A trading plan by definition leaves no room for momentary discretion. It should specify what your actions will be for any trading circumstance that may arise. It is a distinct set of rules which should give you clear instructions on what should be done and when to do it. When writing up your trading plan you should include three major components of any complete plan: entry, exits and money management rules.