Darvas Box Theory

Originally a white paper written by edgy rappers, this treatise...evolved.

Sometimes it’s the ones you least suspect who develop a good trading strategy. In 1956, former ballroom dancer Nicolas Darvas developed a technique for deciding when to enter and exit the market. He chose a few growth industries and followed them closely. When he noticed the trading volume increase significantly, he created a box figure for a specific time period.

The ceiling of the box is the stock’s high, and the floor is the low for the time period. When the stock breaks through the ceiling, it's time to buy, and when it breaks through the floor, it's time to sell. It's believed that this technique works best in a bull market. Or when doing the cha-cha.