Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated January 16, 2021

What is the Darvas Box Theory?

Named after famous ballroom dancer Nicolas Darvas, the Darvas box theory is a trading technique based on 52-week highs and volumes.

How Does the Darvas Box Theory Work?

To implement a Darvas box technique, an investor simply looks at stocks with heavy trading volume and then buys those stocks when they rise above their 52-week highs.

Specifically, the stock's 52-week high represents the floor of the box. When the stock 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 stock goes above the top of the box, buy the stock; when the stock goes below the floor of the box, sell it.

A new box forms when the stock hits 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 Does the Darvas Box Theory Matter?

The Darvas box technique is easy to use and relies only on stock 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 only in bull markets.

Ask an Expert about Darvas Box Theory
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Darvas Box Theory.
Be the first to ask a question

If you have a question about Darvas Box Theory, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Darvas Box Theory, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Darvas Box Theory

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms