Darvas Box Theory

Filed Under » , , ,
Dictionary Says

Definition of 'Darvas Box Theory'

A trading strategy that was developed in 1956 by former ballroom dancer Nicolas Darvas. Darvas' trading technique involved buying into stocks that were trading at new 52-week highs with correspondingly high volumes.

A Darvas box is created when the price of a stock rises above the previous 52-week high, but then falls back to a price not far from that high. If the price falls too much, it can be a signal of a false breakout, otherwise the lower price is used as the bottom of the box and the high as the top.
Investopedia Says

Investopedia explains 'Darvas Box Theory'

In 1956, Darvas was able to turn an investment of $10,000 into $2 million over an 18-month period. While traveling for his dancing, Darvas would obtain copies of The Wall Street Journal and Barron's, but he would only look at the stock prices to make his decisions. It has been said that Darvas was less happy about the profits that he made than he was about the ease and peace of mind that he got from implementing his system.

Skeptics of Darvas' technique attribute his success to the fact that he was trading in a very bullish market. They also say that returns comparable to the ones he saw can't be attained if this technique is used in a bear market.

Articles Of Interest

  1.

    The Darvas Box: A Timeless Classic

    This method helped its inventor turn $26,000 into $2 million. Many argue it still works.

  2. Darvas Box Traps Elusive Returns

    Follow a modern trade to see how this old strategy still captures profits today.

  3. The Basics Of Game Theory

    Break down and examine the potential consequences of economic/financial scenarios.

  4. Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.

  5. Basics Of Technical Analysis

    Learn how chartists analyze the price movements of the market. We'll introduce you to the most important concepts in this approach.

  6. Low Expense Top Performing ETFs

    A technical look at the four ETFs that rank highest for five-year performance, lowest expense ratio and total net assets.

  7. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  8. Market Summary For June 7, 2013

    The major U.S. indices were mixed this week as modest improvements in employment numbers struggled to offset stagnant wages and a slightly higher unemployment rate.

  9. Stocks With Bullish MACD Crossovers

    One of the most popular trading indicators is the MACD, and right now it's flashing a bullish signal in these four stocks.

  10. The Top Trade Setups In Tech

    Check out these trade setups in four technology stocks to take advantage of strong market conditions, while still controlling risk.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=63f9be626a6cdb3365360dd92e4132a7