To apply the Darvas Box strategy in technical trading, you identify a stock that is moving up in price, draw a box around its recent high and low price range, and buy when the price breaks above the top of that box. This method helps capture momentum by entering trades only when the stock shows strong upward movement.

What is the Darvas Box Strategy?

The Darvas Box strategy is a momentum trading technique developed by Nicolas Darvas. It involves identifying a stock trading within a defined price range and waiting for a breakout above the upper limit of that range to enter a trade. The "box" represents a consolidation zone, and a breakout indicates a potential start of a new upward trend.

How Do You Draw a Darvas Box?

To draw a Darvas Box, find a stock that is in an uptrend and has paused to form a range. Mark the recent high as the top of the box and the recent low as the bottom. The stock should stay within this range for a few days. Once it breaks above the top level with volume, it is a signal to buy.

When Should You Buy Using Darvas Box?

You should buy a stock when it breaks out above the top of the Darvas Box with strong volume. This breakout shows that the stock has momentum and is likely to continue rising. Avoid buying inside the box or before a clear breakout to reduce the risk of false signals.

How Do You Set a Stop Loss in Darvas Box?

Set your stop loss just below the bottom of the Darvas Box. If the stock price falls below this level after a breakout, it signals a failed move, and you should exit to protect your capital. This simple rule helps manage risk and avoid big losses during false breakouts.

Does the Darvas Box Work in Indian Markets?

Yes, the Darvas Box strategy works well in Indian stock markets too, especially on trending stocks like Reliance, TCS, or Titan. Many traders in India use this strategy on daily or weekly charts to catch big moves. It’s simple to follow and works best in bullish market conditions.

What Are the Advantages of Darvas Box Strategy?

The Darvas Box strategy is easy to understand, works well in trending markets, and helps traders avoid emotional decisions. It offers clear entry and exit points, and combines price action with volume to improve accuracy. It also encourages discipline by waiting for breakout confirmations before entering trades.