Darvas Box indicator is a great technical analysis tool which was introduced by Nicholas Darvas. Darvas was a dancer who made $2,000,000 within a period of 18 months, trading in the market while on a global dance tour using this theory. This trading technique uses the fundamental idea of trading those stocks that have made new highs. The Box is formed when the price of the stock making new highs, falls from high to a point that is not far from previous high. Traders can trade the stock with defined stop-loss formed at the base of the stock. The strategy works well when accompanied by volume. This indicator is also known as a timeless classic. Zerodha Kite charts has Darvas Box in the studies section.
How to set up Darvas Box indicator in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Darvas Box and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected, the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
How to trade intraday using Darvas Box indicator?
- The indicator shows price trend and trading opportunities.
- The picture above shows SBIN (State Bank of India) stock price movement with respect to the indicator.
- The chart shows 1 min. timeframe.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- In 1-minute chart, traders may find many whipsaws which will be eliminated if longer time frames are used and this indicator is used with a combination of other indicators.
- This indicator is used only for buying a stock. Create buy position when price moves above the box targeting higher boxes. The buy position will be stopped out if the stock price goes below the base of the box, which is the stop-loss price. The indicator does not give any time limit for price movement.
Traders can use this technical indicator to create buy position and holds the position till target is reached or the stop loss is breached, irrespective of any time limit. This indicator is a classic example of breaking of support and resistances. Buy signals are created when box resistances are broken and sell signals are created when the box supports are broken.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.
Categories: Technical Indicators