Darvas Boxes for Breakout Entries and Trailing Stops

Summary

The document explains the Darvas box concept as a trend-following method for defining a price range from pauses in new highs and lows. A box top is identified after price stops making highs for three consecutive days, with the lower boundary identified after a similar pause in new lows. A move above the top can prompt an entry or an additional position, while the box bottom serves as a stop reference.

It includes an indicator implementation intended to draw the boundaries, but warns that the construction can create bullish bias and that the code uses future prices that would not be known at the time. Those issues can make historical signals look better or appear earlier than they could in live trading. The document provides no performance data, and the indicator’s look-ahead behavior limits its usefulness for direct backtesting without correction.

Key ideas

• The method defines box boundaries after several days without a new high or low.
• A breakout above the upper boundary can trigger an entry or an added position.
• The lower boundary is used as a stop reference.
• The document warns that the indicator introduces bullish bias and uses future price information.

Tags

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