Darvas box is one of the most underrated indicator for taking investing and day trading decisions.
What is Darvas box?
Darvas box is named after great dancer NICHOLAS DARVAS (1920-1977), who performed dancing shows all over the world. He once accepted the shares as a remuneration to perform the show and eventually he forgot about the shares since he was so busy performing events after events all over the world.
After six months, he came to know that share price has increased substantially and his investments were making good amount of returns. In this way he started to invest in shares of different companies and he was making very good returns. During his period he himself developed a strategy and he followed it so religiously and it has given him good returns and over a period he became a millionaire and eventually it was followed by many investors and traders as well. Since he was having mad following it was apparently named as Darvas box.
How to use Darvas box in Day trading?
I will provide some attachments for reference to understand easily.
At 1 candles in Darvas box tried to break the new high with 1a, despite of having good volumes it didn’t succeeded to break those levels. In next candle it continued to break the previous level but unable to break the new levels again, it continued to stay in sideways. Here we can see absolutely intraday trades are finished.
Next day on 2 tried to break previous lower levels, but it didn’t happen since it closed with very minimal volumes in 2b.
In 3 the range started to be a downtrend, because of DARVAS BOX STOP LEVELS we can clearly see that market is in rangebound from 10 am to 3pm with few spikes in middle (up and down) only to trap bulls and bears. In 3b,if we see the volume rise @3pm it clearly it indicates a uptrend movement. So shorts got trapped.
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