Investopedia

Darvas Box Theory

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. Strong Volume Gainers, Can It Continue?

    Volume is one of those indicators that gets overlooked, likely because it's shown by default on almost every chart, making it a little dull. But volume is what drives markets. Big volume jumps ...
  7. Market Summary For May 17, 2013

    The U.S. stock markets moved sharply higher this week, on track for its fourth straight week of gains, driven by ongoing improvements in economic indicators.
  8. Parabolic SAR Buy Signals

    The Parabolic SAR indicator is flashing "buy" in these four diverse stocks. Not simply relying on one indicator though, I take a look at the overall technical outlook and determine which ones ...
  9. Sell In May – Yay Or Nay?

    Seasonal timing in the market, best personified by the adage, “Sell in May – Go away,” has long been the subject of debate among investors. The question remains: Is there anything to it?
  10. Market Summary for May 10 2013

    Major U.S. indices moved higher this week but, given the new highs, traders should watch for retracements next week.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.
  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.
  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center