Shapes of Boxes and Darvas

Continuing with my self-study of stock trading, I came across Darvas Box Theory

Lifted from Investopedia

• Darvas' trading technique involves buying into stocks that are trading at new highs 
• The strategy traces its origins to 1956, when Nicolas Darvas turned a $10,000 investment into $2 million over an 18-month period using this theory.  
• type of momentum strategy
• to determine when to enter and exit the market 
• If the price breaks out of the Darvas box, the investor takes this as a sign of a breakout

MoneyGrowers advise to use Dravas Box in  stocks with a.) 52 week high and b.) high volume.
How to plot: 1. highest point, check next forward 3 candles if this point is not superseded; this will be the top border; then 2. mark the lowest point in the next 3 candles.  The ends of the candles measured may be body to body or wick to wick.

Notes:

• Once the price pierces the upper border by 1-2% then it is a buy signal
• Stop loss price is the lower border
• Once the lower border is pierced, the lower border is plotted first before the top border
• After a series of making boxes, you have a price range

ZF wrote

• successful breakouts are usually in a form of solid long green candles with high volume
• break from the border sends the price flying or falling into the border's direction
• if the price touches the border but does not break it, the border is said to be tried and tested