Table of Contents
INTRODUCTION: DARVAS BOX
Darvas box theory is a technical strategy which is developed in the 1950s by Nicolas Darvas. Investors use this strategy when prices in the market are above the previous high. Investors with the help of this strategy establish the entry level and stop-loss order in their investment.
Investors buy stocks at a new high and draw a box around the recent time highs and lows. This strategy basically works on the combination of technical analysis of market and price momentum.
BACKGROUND: DARVAS BOX
In the late 1950s, Nicolas Darvas was travelling the world as a ballroom dancer. Nicolas Darvas was one-half of the highest-paid dance team in show business. The journey of investing in the stock market started at Toronto nightclub, when the club was unable to pay him in cash, instead of paying him in shares.
After this, he became a dancer as well as a self-taught investor and author. Darvas turn a $10,000 initial investment into $2,000,000 by his draw boxes and follow his own trading rules. His success led to a book he wrote called HOW I MADE $2,000,000 IN THE STOCK MARKET and after this the Darvas box theory became popular.
CALCULATION: DARVAS BOX
Boxes show the tight ranges of stock. Whenever the stock breaks the 52-week keeps them on the watch list. The high point of the Darvas box is called CEILING and the low point of the Darvas box denotes FLOOR. Look for the volume breakout too and the breakout should be above average volume.
THE CHART: DARVAS BOX
INTERPRETATION: DARVAS BOX
The interpretation of Darvas boxes is repeatedly bouncing inside the ranges of boxes. buy the stock at 52-week high and exit from it if the stock hits 52-week low and buy the stock at 52-week low and exit from it if it hits 52-week high.
Investors use this strategy of targeting stocks that have a tendency of increased trade volume. The box is formed when the price goes to new highs and lows. Investors apply this theory as an indicator of when to enter in the market or exit to the market.
BREAKOUT@ DARVAS BOX
BUY SIGNAL@ DARVAS BOX
When the Darvas box denotes close above the top of the box it shows a buy signal at the ceiling point.
SELL SIGNAL@ DARVAS BOX
When Darvas box denotes close below the bottom of the box show sell signal at the stop close oder.
DARVAS BOX BREAKOUT STRATEGIES
DARVAS RULES OF STRATEGY
- The stock price must be in the close range of all-time high within 15-20% range of 52 weeks high
- The price trend of the market must be on the upside above 100 to 200 points moving average
- Price must be double from its all-time low in 52 weeks low
- After marked CEILING of the Darvas box, the next 3, 4 candles do not break the ceiling.
- After marked FOOR of the Darvas box, the next 3, 4 candles do not break the floor.
BREAKOUT@ DARVAS BOX
BEHAVIOUR OF VOLUME
- Price up trend + volume up trend -> price will go high = Avoid sell
- Price downtrend + volume up trend -> price will go more down = avoid buy
- Price up trend + volume downtrend -> price will go down at any time = avoid buy
- Price downtrend + volume downtrend -> price will go high at any time = reverse trend will start
SETUP OF DARVAS BOX WITH VOLUME
Made 52 high draw ceiling as next 3 candles have not broken the high. Stock price breakout with high volume and indicate to the new entry of stock price. The momentum of price trend and volume trend is both upside direction.
“When the value of stock price trend moving upside with strong volume till its rise when stock price hit your stop-loss order then sell the stock”
Note: ये वेबसाइट सिर्फ आपको इनफार्मेशन देने के लिए कंटेंट डालती है। आप किसी तरह के फ्रॉड से सावधान रहे।। किसी भी एप्लीकेशन या कंपनी से लोन लेना सिर्फ और सिर्फ लेनदार की ही जिम्मेदारी होगी !!
For more information click: www.rbi.gov.in/www.sebi.gov.in