Hi Leapyear,
I was wondering where you disappeared to? Darvas's box strategy looks interesting. As the saying goes "Keep it Simple". The use of the box theory works in that it keeps you invested in a stock that is in a Good trend. The trailing stop keeps you in the stock while it is uptrending and selling if the trend is broken using the theory that previous resistance should become support in an uptrend. If that support is violated the stop is triggered. The boxes could be used inversely when looking to Short a stock using the theory that previous support will become resistance in a downtrend. That means that any violation of the lower support level of the box could be used as a Short with a move back above that level (the top of the box) as the stop loss order for the Short. His method seems extremely logical in that it keeps you in the stocks that are Trending and has you exit the stock when the trend is broken. It looks as though it could easily be applied in either a Bull or Bear market depending on whether you are trading the stock Up or Down. It mearly targets the Support and Resistance levels and uses them to determine a Trend and keep you invested in it. I'll see if I can do some more DD on it. Just remember that middle of the boxes will be similar to using the SMAs as an indication of support or resistance since they are also calculated based on whether a stock or index is finding support or resistance at previous price levels. The boxes work better for setting top and bottom targets to look for. You can see in these charts where the reset box after the breakdown below 24 set the next boxtop near $25, right where the stock topped out near the SMA resistance. Not sure how long it took for the bottom of the box to form at 21.10 but Darvas' theory would have kept you Short until the $25 level was violated. Perhaps a smaller box should have been formed the week of Dec 27th as once that support level was violated it became resistance. Using the theory of support and resistance and how they relate to each other is what makes the Darvas system work IMO. A smaller box at the end of the chart might indicate that GSF has broken out of the box since $21 resistance has been broken. You can see in the lower chart when $21 resistance was taken out that the stock moved higher. I guess that it would depend on the timeframe you are looking for with a trade though.
Great Board Leapyear! Sincerely, Bob :^)
I was wondering where you disappeared to? Darvas's box strategy looks interesting. As the saying goes "Keep it Simple". The use of the box theory works in that it keeps you invested in a stock that is in a Good trend. The trailing stop keeps you in the stock while it is uptrending and selling if the trend is broken using the theory that previous resistance should become support in an uptrend. If that support is violated the stop is triggered. The boxes could be used inversely when looking to Short a stock using the theory that previous support will become resistance in a downtrend. That means that any violation of the lower support level of the box could be used as a Short with a move back above that level (the top of the box) as the stop loss order for the Short. His method seems extremely logical in that it keeps you in the stocks that are Trending and has you exit the stock when the trend is broken. It looks as though it could easily be applied in either a Bull or Bear market depending on whether you are trading the stock Up or Down. It mearly targets the Support and Resistance levels and uses them to determine a Trend and keep you invested in it. I'll see if I can do some more DD on it. Just remember that middle of the boxes will be similar to using the SMAs as an indication of support or resistance since they are also calculated based on whether a stock or index is finding support or resistance at previous price levels. The boxes work better for setting top and bottom targets to look for. You can see in these charts where the reset box after the breakdown below 24 set the next boxtop near $25, right where the stock topped out near the SMA resistance. Not sure how long it took for the bottom of the box to form at 21.10 but Darvas' theory would have kept you Short until the $25 level was violated. Perhaps a smaller box should have been formed the week of Dec 27th as once that support level was violated it became resistance. Using the theory of support and resistance and how they relate to each other is what makes the Darvas system work IMO. A smaller box at the end of the chart might indicate that GSF has broken out of the box since $21 resistance has been broken. You can see in the lower chart when $21 resistance was taken out that the stock moved higher. I guess that it would depend on the timeframe you are looking for with a trade though.
Great Board Leapyear! Sincerely, Bob :^)
Good Luck to All! :^)
PLAN the TRADE and TRADE the PLAN!
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
