Darvas Boxes for Breakout Entries and Stop Placement

Summary

The document introduces the Darvas box approach, which uses recent price highs and lows to define a trading range around a stock making new highs. A breakout above the box can serve as an entry signal, while the box boundaries help frame a stop-loss. The included indicator logic tracks candidate upper and lower boundaries using comparisons across recent bars, marks a box once its conditions are met, and resets the state when price crosses a boundary.

The material is primarily a description and code contribution, not a tested trading system. It gives no rules for position sizing, exits beyond the described stop placement, universe selection, or handling of transaction costs and gaps. Although the introductory explanation mentions volume as part of Darvas’s approach, the supplied indicator code uses price conditions and does not show a volume filter. Traders would need to verify the implementation and evaluate the rules on suitable data before relying on them.

Key ideas

• Darvas boxes frame recent price highs and lows as a trading range.
• The approach seeks stocks making new highs and can use a breakout as an entry signal.
• The box boundaries can inform stop placement.
• The supplied indicator identifies and resets boxes through recent-bar price comparisons.
• The code contains no explicit volume condition or performance evaluation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.