Darvas Box Theory Summary

There is a thing called Darwish Box Theory Based on that, many people are trading Even the big H1 managers are using it to identify a long term trend The person who discovered this is Nicholas Darwish He had no connection with trading When he started in the 1960s, he was a normal dancer But eventually, he got interested in trading and learned a lot about it When he started trading in the 1960s, he started with only 10,000 dollars over the period He took almost 2 million dollars. So in this overall video, How did Darwish create this theory? What are the rules of this trading setup? How can we trade with this? Let's see in detail. How I made 2 million dollars? There is a book by Nicholas Darwish. If you haven't read that book yet, please do. Because that book is the first book I read. I started reading it in 2014. I was trading randomly and after reading that book, I completely got into rule based trading and the majority of the impact was created by that book because before that, any book would be very complicated to read like the book written by Warren Buffett or Benjamin Graham it would be very tough to read but this Nicholas Darvas was like a story telling his overall journey as a person who doesn't know trading He started trading and lost in the initial period. After that, he learned a lot. He implemented what he learned. He also made charts and showed how he took the trade and how it broke out. By reading the book, you will get a clear cut idea. The major idea is that if I do this, I will do it in a role based study. I will not trade randomly. I will not trade without a setup. So, a person who doesn't know anything about trading, who learned trading, followed a rule, and studied how he brought $10,000 to $2,000,000 in detail, is the book, How I Made $2,000,000 by Nicholas Darvas. So, definitely, I highly recommend that book. So, let's see what is his further setup in detail. So, generally, trading is called Buy Low Sell High. It is said simply. It works in theory, but it is very difficult to implement it practically. But, I didn't follow the Buy Low Sell High that Nicholas Darvas did. I will consider the trend only if the stock goes up. I will not buy the stock if it goes down or if it is cheap. If the stock goes up after breaking out of the level, it will enter my radar. Once it enters my radar, I will buy the stock and continue the trial. Once the trend is weak, I will come out. This is his basic core principle. So how does he identify this trend? The chart you are seeing is one of the examples of his trade. He took this chart in 1957. If that logic is valid till today, then it would have been built based on sound fundamental principles. The first rule is that he is taking a stock, L'oreal Ardyn, a high growth sector stock. In 1957, it created a 52 week high with higher volumes. The place marked with the AIN is where the higher volume stock breakout the price and created a 52 week high. So, he noted the high price and the price retracement from that high and went down. After the drop, he marks the high, that is the resistance zone. He places a buy order above the resistance zone. He places and waits, so that in case the market goes up, the buy order will be executed. Similarly, the buy order is executed. To execute, he makes the stop loss at the low price of that particular candle. So, the bean mark, the peak marked as bean is the 52 week high. So 52VKI was created initially and then retracement was done. After that when it goes up and breaks out, he purchased at the C level. After purchasing, the overall risk was $400. But eventually, the market broke out and went up further and tried again. He bought additional at D. He bought additional shares at E. He did pyramid at F. This is opposite to most of the traders. Most of the traders will do the same. They will do the same when they go against the market. But this person is doing it wrong. Because you have taken a trade and if you go against the market, the market has already proved you wrong. It doesn't make sense to fight with that. Instead, you are buying the market. When you go against the market, the market is telling you that you are right. so if you buy less, it is an indication to buy more so when the market breaks out and goes in my direction, I will additionally pyramid so he will buy till F and eventually exit from G when the breakout fails so overall his risk to reward ratio is 1 to 14 so initially he risked 100 rupees and took 14 times returns in this trade So his general philosophy is that if a stock creates 52 week high immediately don't buy it If that 52 week high is created then a big bullish momentum is created But it may be a false breakout so what you do is wait for a 52 week high to create After a while it will be retracement and consolidate After consolidation, if it crosses the same 52 week high and creates a new 52 week high it will give double confirmation so if the resistance breaks before this then there will be a lot of buying pressure so it will break out in a big volume this trade will be more valid than the first breakout so if a stock breaks out without entering immediately let it go to consolidation phase if it breaks out at the same level and goes up then buy, in this chart he is creating 52 vikaya it is coming inside a box formation and consolidating he is placing a buy order above the breakout when the order triggers in the buy order, he will get into a trade and he is keeping a stop loss level in the mid level of the box so that if the box comes back inside the breakout, it is a failed breakout so i will come out So, my risk is small, in case it is a positive breakout, my returns will be big. So, this is my overall setup that I follow. Now, let's see the same setup of Darvas in a live example. Now, you are seeing BSE. So, I have mentioned weekly chart time frame in BSE stock, so that we can identify a longer trend easily. So, overall, initially, when BSE was listed, it completely went down. So, it went down and further a box formation, so it couldn't go further high. so completely in the box cool on trade I turned it once trade on the kapram I in the box or the lower as a breakdown panel breakdown for the kapram a patina further a key to pose and no tribe a bounce back I further on the box of color or a tripod of the level of a model a resistance to the end of selling pressure record and then further market key to the so in the complete downtrend a patina other list on a little 2020 or you can download that and the kapram a complete our consolidation phase learn the written the whole period a patina or consolidation phase. when the price breaks out of this box, it gives a big movement so if you see correctly, it is coming out of this box so we would have bought at this point so overall, if you check the volume, there will be a big movement at this point as I said, it has broken out at the highest volume and the market goes further up so after going up, as I said earlier, it has created 52 week high and again it has created 52 week high and after that, a consolidation phase comes from the consolidation phase, the high crosses again so the market goes up further after going up, a 52 week high is created here and there is a consolidation here it breaks out again in the same volume so when it breaks out, a new 52 week high is created and after that, a resistance occurs here so it cannot go up further so when the box comes down, we exit ok, the uptrend continues and the box comes down we will hold the box to go up and exit when it goes down then we will enter the consolidation phase then we will enter the uptrend phase the complete uptrend movement is 293 rupees and it will capture the trend to more than 3000 rupees because every time you see, it will be we will buy when it goes out in case if it comes inside the previous box we will exit, sometimes in such places our stop loss will be hit but again if you enter the next trade after that it will not come to the mid level of the previous box so it will be here so every time this level crosses and goes further now if it goes up from this box, it will be further up trend if it goes down from this box we can exit the stock we bought and wait so this is his overall approach, he puts the box as a box and when it breaks out above the box, he enters and when it comes down below the box, he exits the stock, this is the downtrend so this is the darwish box theory, how to focus on the stocks with a support and resistance of 52 weeks high and when it breaks out, he enters, and when it goes down below the box, he exits This is how you can write multiple stocks. and the money management rules he used in the previous video when the stocks go in favour he added more stocks and made a pyramid so overall profitability will be high So this is the overall setup, this is what I wanted to convey. If I have explained any doubts, you can mention in the comments and I will respond.

How can we trade with this? Let's see in detail. How I made 2 million dollars?

There is a book by Nicholas Darwish. If you haven't read that book yet, please do. Because that book is the first book I read.

I started reading it in 2014. I was trading randomly and after reading that book, I completely got into rule based trading and the majority of the impact was created by that book because before that, any book would be very complicated to read like the book written by Warren Buffett or Benjamin Graham it would be very tough to read but this Nicholas Darvas was like a story telling his overall journey as a person who doesn't know trading He started trading and lost in the initial period. After that, he learned a lot. He implemented what he learned.

He also made charts and showed how he took the trade and how it broke out. By reading the book, you will get a clear cut idea. The major idea is that if I do this, I will do it in a role based study. I will not trade randomly.

I will not trade without a setup. So, a person who doesn't know anything about trading, who learned trading, followed a rule, and studied how he brought $10,000 to $2,000,000 in detail, is the book, How I Made $2,000,000 by Nicholas Darvas. So, definitely, I highly recommend that book.

So, let's see what is his further setup in detail. So, generally, trading is called Buy Low Sell High. It is said simply.

It works in theory, but it is very difficult to implement it practically. But, I didn't follow the Buy Low Sell High that Nicholas Darvas did. I will consider the trend only if the stock goes up. I will not buy the stock if it goes down or if it is cheap.

If the stock goes up after breaking out of the level, it will enter my radar. Once it enters my radar, I will buy the stock and continue the trial. Once the trend is weak, I will come out. This is his basic core principle.

So how does he identify this trend? The chart you are seeing is one of the examples of his trade. He took this chart in 1957. If that logic is valid till today, then it would have been built based on sound fundamental principles. The first rule is that he is taking a stock, L'oreal Ardyn, a high growth sector stock.

In 1957, it created a 52 week high with higher volumes. The place marked with the AIN is where the higher volume stock breakout the price and created a 52 week high. So, he noted the high price and the price retracement from that high and went down. After the drop, he marks the high, that is the resistance zone. He places a buy order above the resistance zone.

He places and waits, so that in case the market goes up, the buy order will be executed. Similarly, the buy order is executed. To execute, he makes the stop loss at the low price of that particular candle.

So, the bean mark, the peak marked as bean is the 52 week high. So 52VKI was created initially and then retracement was done. After that when it goes up and breaks out, he purchased at the C level.

After purchasing, the overall risk was $400. But eventually, the market broke out and went up further and tried again. He bought additional at D.

He bought additional shares at E. He did pyramid at F. This is opposite to most of the traders. Most of the traders will do the same.

They will do the same when they go against the market. But this person is doing it wrong. Because you have taken a trade and if you go against the market, the market has already proved you wrong. It doesn't make sense to fight with that. Instead, you are buying the market.

When you go against the market, the market is telling you that you are right. so if you buy less, it is an indication to buy more so when the market breaks out and goes in my direction, I will additionally pyramid so he will buy till F and eventually exit from G when the breakout fails so overall his risk to reward ratio is 1 to 14 so initially he risked 100 rupees and took 14 times returns in this trade So his general philosophy is that if a stock creates 52 week high immediately don't buy it If that 52 week high is created then a big bullish momentum is created But it may be a false breakout so what you do is wait for a 52 week high to create After a while it will be retracement and consolidate After consolidation, if it crosses the same 52 week high and creates a new 52 week high it will give double confirmation so if the resistance breaks before this then there will be a lot of buying pressure so it will break out in a big volume this trade will be more valid than the first breakout so if a stock breaks out without entering immediately let it go to consolidation phase if it breaks out at the same level and goes up then buy, in this chart he is creating 52 vikaya it is coming inside a box formation and consolidating he is placing a buy order above the breakout when the order triggers in the buy order, he will get into a trade and he is keeping a stop loss level in the mid level of the box so that if the box comes back inside the breakout, it is a failed breakout so i will come out So, my risk is small, in case it is a positive breakout, my returns will be big. So, this is my overall setup that I follow.

Now, let's see the same setup of Darvas in a live example. Now, you are seeing BSE. So, I have mentioned weekly chart time frame in BSE stock, so that we can identify a longer trend easily. So, overall, initially, when BSE was listed, it completely went down.

So, it went down and further a box formation, so it couldn't go further high. so completely in the box cool on trade I turned it once trade on the kapram I in the box or the lower as a breakdown panel breakdown for the kapram a patina further a key to pose and no tribe a bounce back I further on the box of color or a tripod of the level of a model a resistance to the end of selling pressure record and then further market key to the so in the complete downtrend a patina other list on a little 2020 or you can download that and the kapram a complete our consolidation phase learn the written the whole period a patina or consolidation phase. when the price breaks out of this box, it gives a big movement so if you see correctly, it is coming out of this box so we would have bought at this point so overall, if you check the volume, there will be a big movement at this point as I said, it has broken out at the highest volume and the market goes further up so after going up, as I said earlier, it has created 52 week high and again it has created 52 week high and after that, a consolidation phase comes from the consolidation phase, the high crosses again so the market goes up further after going up, a 52 week high is created here and there is a consolidation here it breaks out again in the same volume so when it breaks out, a new 52 week high is created and after that, a resistance occurs here so it cannot go up further so when the box comes down, we exit ok, the uptrend continues and the box comes down we will hold the box to go up and exit when it goes down then we will enter the consolidation phase then we will enter the uptrend phase the complete uptrend movement is 293 rupees and it will capture the trend to more than 3000 rupees because every time you see, it will be we will buy when it goes out in case if it comes inside the previous box we will exit, sometimes in such places our stop loss will be hit but again if you enter the next trade after that it will not come to the mid level of the previous box so it will be here so every time this level crosses and goes further now if it goes up from this box, it will be further up trend if it goes down from this box we can exit the stock we bought and wait so this is his overall approach, he puts the box as a box and when it breaks out above the box, he enters and when it comes down below the box, he exits the stock, this is the downtrend so this is the darwish box theory, how to focus on the stocks with a support and resistance of 52 weeks high and when it breaks out, he enters, and when it goes down below the box, he exits This is how you can write multiple stocks. and the money management rules he used in the previous video when the stocks go in favour he added more stocks and made a pyramid so overall profitability will be high So this is the overall setup, this is what I wanted to convey. If I have explained any doubts, you can mention in the comments and I will respond.

Transcript for:Darvas Box Theory Summary

Transcript for:
Darvas Box Theory Summary