After a new high, if price cannot exceed that high for a set period, the consolidation range locks in as one box. Buy when price clears the box top on volume, with the stop at the box bottom. A trend-following method that lets profits run while ratcheting the stop up box by box.
A Darvas box is the idea of framing a consolidating price range inside a box, top and bottom, then climbing aboard when the top breaks.
The method comes from Nicholas Darvas, a dancer turned investor, who pictured ranges of churning price as literal boxes.
There is a clear procedure for drawing a box. After price prints a new high, if it cannot exceed that high for a set period (Darvas used three days as his guide), that high locks in as the box top. Next, if the low made afterward holds for a set period, that low locks in as the box bottom. With top and bottom set, one box is complete.
In an uptrend these boxes stack from low to high like a staircase. Price clears the old box top, a new box forms one step higher, price clears that, and the next box forms.
A Darvas box is best understood not as a shape you try to spot but as a trend-following framework that decides mechanically when to climb aboard and where to step off. Buy when price clears the box top on volume, and place the stop at the box bottom. As long as the trend continues, the stop ratchets up each time a new box forms.
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