when the stock broke through the ceiling of the current box darvas would buy the stock and use the ceiling of the breached box as the stop loss for the position as more boxes were breached darvas would add to the trade and move the stop loss order up the trade would generally end when the stop loss order was triggered 1
darvas developed his theory in the 1950s while traveling the world as a professional ballroom dancer the origin of darvas box theorynicolas darvas fled his native hungary ahead of the nazis in the 1930s eventually he reunited with his sister and soon after following world war ii they began dancing professionally in europe by the late 1950s nicolas darvas was one half of the highest paid dance team in show business he was in the middle of a world tour dancing before sold out crowds while traveling as a dancer darvas obtained copies of the wall street journal and barron s but only used the listed stock prices to determine his investments by drawing boxes and following strict trading rules darvas turned a 10 000 investment into 2 million over an 18 month period his success led him to write how i made 2 000 000 in the stock market in 1960 popularizing the darvas box theory 2today there are variations to the darvas box theory that focus on different time periods to establish the boxes or simply integrate other technical tools that follow similar principles such as support and resistance bands darvas initial strategy was created at a time when information flow was much slower and there was no such thing as real time charting despite that the theory is such that trades can be identified and entry and exit points set applying the boxes to the chart even now limitations of the darvas box theorycritics of the darvas box theory technique attribute darvas initial success to the fact that he traded in a very bullish market and assert that his results cannot be attained if using this technique in a bear market it is fair to say that following the darvas box theory will produce small losses overall when the trend doesn t develop as planned the use of a trailing stop loss order and following the trend momentum as it develops has become a staple of many technical strategies developed since darvas as with many trading theories the true value in the darvas box theory may actually be the discipline it develops in traders when it comes to controlling risk and following a plan darvas emphasized the importance of logging trades in his book and later dissecting what went right and wrong 