Darvas Box Theory
What it is:
Named after famous ballroom dancer Nicolas Darvas, the Darvas box theory is a trading technique based on 52-week highs and volumes.
How it works (Example):
Specifically, the 52-week high represents the floor of the box. When the price reaches a new 52-week high and then falls from that high or at least doesn’t penetrate that high for three days, that new 52-week high becomes the top of the box. The idea is simple: when the goes above the top of the box, buy the ; when the goes below the floor of the box, sell it.'s
A new box forms when thehits a third 52-week high, with the second 52-week high becoming the floor. In this way, boxes can pile up.
To see some examples of Darvas box theory, click here.
Why it Matters:
The Darvas box technique is easy to use and relies only on only in markets.prices and trading volumes for buy and sell signals. The trick worked for Darvas: he reportedly turned a few thousand dollars into millions in 1956. However, critics argue that the technique produces profits