Tuesday, February 25, 2003 9:21:37 AM
Using Darvas to Trade non-trending stocks
The key here is to set your Boxes wherever support is broken or resistance is broken. Here is a PAYX chart but you can see that the boxes are set for too long of a timeframe. If you shorten the boxes to just around a weeks timeframe and set your box tops at resistance and the bottoms at support then you can see that just about every week one of the boxes would be broken to the upside or the downside. The primary Trend in PAYX from 27 Nov until 18 Dec was down. You can see that the first weeks support was broken to the downside and became resistance in the middle of the diagramed box. If you were short PAYX from $30 resistance then when the support at 26.964 was broken you could have redrawn a new box top using 26.964, or $27, as your resistance level to be stopped out of the trade if looking to trade in a shorter timeframe. The breakout back above $27 would have had you exiting your $30 short as the new box top was broken. This breakout of the $27 resistance could have triggered a Long trade back to the top of your previous box resistance at $30 where you would once again look for the continued breakout. The breakout Failed to happen and you could have then closed your Long trade and once again gone Short using a breakout of the $30 level as your stop loss. Once the stock moved back below 26.964 support again you would lower your stop back to the $27 level and continue to hold short until that level is taken out to close your $30 short. If the stock moved below 23.968 you could add shares and once again lower your stop loss to that level to keep locking in profits on your short. That is how readjusting the Boxes to determine the Trend using the support and resistance levels could let you use the Darvas method in Any type of market. You just need to determine the timeframe you want to use for the trades and how tight you want to be with your stops to lock in profits and detect the change of trend signals. JMHO :^)
The key here is to set your Boxes wherever support is broken or resistance is broken. Here is a PAYX chart but you can see that the boxes are set for too long of a timeframe. If you shorten the boxes to just around a weeks timeframe and set your box tops at resistance and the bottoms at support then you can see that just about every week one of the boxes would be broken to the upside or the downside. The primary Trend in PAYX from 27 Nov until 18 Dec was down. You can see that the first weeks support was broken to the downside and became resistance in the middle of the diagramed box. If you were short PAYX from $30 resistance then when the support at 26.964 was broken you could have redrawn a new box top using 26.964, or $27, as your resistance level to be stopped out of the trade if looking to trade in a shorter timeframe. The breakout back above $27 would have had you exiting your $30 short as the new box top was broken. This breakout of the $27 resistance could have triggered a Long trade back to the top of your previous box resistance at $30 where you would once again look for the continued breakout. The breakout Failed to happen and you could have then closed your Long trade and once again gone Short using a breakout of the $30 level as your stop loss. Once the stock moved back below 26.964 support again you would lower your stop back to the $27 level and continue to hold short until that level is taken out to close your $30 short. If the stock moved below 23.968 you could add shares and once again lower your stop loss to that level to keep locking in profits on your short. That is how readjusting the Boxes to determine the Trend using the support and resistance levels could let you use the Darvas method in Any type of market. You just need to determine the timeframe you want to use for the trades and how tight you want to be with your stops to lock in profits and detect the change of trend signals. JMHO :^)
Good Luck to All! :^)
PLAN the TRADE and TRADE the PLAN!
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