LOL! Hi Steve, The Darvas box is really simple to use and is the same as when I talk on MKTSS about watching to see if the Support or Resistance is Winning. It uses the same principles of whether or not a stock, or index, is having breakouts or breakdowns and if the previous resistance is broken and becoming support or if the previous support is broken and becoming resistance. Someone put up the link to the sethi.org website and that is what I have been using for the Darvas box charts. It really could use some tweeking to set up shorter timeframes on the boxes though. Here is the link http://www.sethi.org/investments/darvas/ Just from watching PAYX today the box theory could have captured 3 of the stocks moves, $25 to 24.50, 24.50 to $25 and $25 back to 24.60. Not too bad for just triggering the trades off of the targeted support and resistance levels of the Box. I think that the Box theory could easily be applied to Any stock or index regardless of the trend. Using the SMAs as Support or Resistance could have also worked with PAYX and triggered a Short just below 25.75, or using a small box at 25.50. You just need to adjust your Darvas box to include the last support and resistance levels IMO. Using the Box might make it easier to see the actual trade triggers. As I have pointed out before, you just need to draw a line from the last resistance to get a resistance target and the last support to get a support target. If the resistance is broken and becomes support then you are uptrending. If the support is broken and becomes resistance then you are downtrending and you adjust your trade to be in line with the trend. Using the boxes as a visualization should definitely help IMO. You can even see them a little bit if you use the grids on the chart. Good Trading Steve! :^)
A note on Index trades I know that you have some Index Puts so this is how the Darvas box could be viewed for the INDU. If looking Long Term the first Box would have a top at the 8050 resistance level and a bottom at the 7900 level. The quick gap down on Friday could have been ignored as there really was not a time when 7900 clearly became resistance. If using the bottom of the box as Support to go Long from and the top of the box to go Short from you could have exited any Long position on the failure of a breakout and gone Short at the top of the box with a stop loss set at 8050. Once the bottom support of the box was broken at 7900 you can clearly see that 7900 became Resistance. This was the top of the new box and could have been used to add to the Short and you would use a breakout above 7900 as your stop loss. If deciding to hold your trade Long term you could continue to use 7900 as your stop loss order and add to the Short whenever the New support levels are broken and become resistance. If looking to protect your current gains you could move your stop loss order to 7800, the top of the short term box as it is resistance. The short term box would be 7800 top and 7725 bottom. The long term box would be 7900 top and 7725 bottom. Depending on the timeframe you are looking at and how tightly you want to set a stop you would adjust your order to fit your Box. Can you also see how using the SMAs help in determining the type of trade you want to be in? Above the SMAs you are holding Calls and Below the SMAs you are holding Puts. The same theories of whether support or resistance are Holding apply. Good Trading Steve! :^)
Hi Steve, if you use eSignal, I know you can get a Darvas Box script, and automate the whole drawing process... I have it now, and don't see how it can help my trading... now I'm trying to use Zeev's interpretation of box trading...
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