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Saturday, December 27, 2008

Crude Oil & Darvas Box

Darvas Box Theory (By Zhuge Liang)

What Does Darvas Box Theory Mean?

A trading strategy that was developed in 1956 by former ballroom dancer Nicolas Darvas. Darvas' trading technique involved buying into stocks that were trading at new 52-week highs with correspondingly high volumes.

A Darvas box is created when the price of a stock rises above the previous 52-week high, but then falls back to a price not far from that high. If the price falls too much, it can be a signal of a false breakout, otherwise the lower price is used as the bottom of the box and the high as the top.

In 1956, Darvas was able to turn an investment of $10,000 into $2 million over an 18-month period. While traveling for his dancing, Darvas would obtain copies of The Wall Street Journal and Barron's, but he would only look at the stock prices to make his decisions. It has been said that Darvas was less happy about the profits that he made than he was about the ease and peace of mind that he got from implementing his system.

Skeptics of Darvas' technique attribute his success to the fact that he was trading in a very bullish market. They also say that returns comparable to the ones he saw can't be attained if this technique is used in a bear market.

For clearer chart click====> HERE

For clearer chart click====> HERE

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Jessen said...

Not being cocky. But earning 2 million from 10k within 18 months is not really very impressive. Anyone can do better than this if he/she has a very good business plan.

Zhuge Liang said...

Hi Jessen,

ZL admire your high expectations but "easier said than done" is applicable to everyone especially dreamers more so when what Darvas did was in 1956.


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