Using The Darvas System

Discussion in 'Journals' started by toby, Jun 15, 2005.

  1. toby


    Jun 28, 2005

    Bought LUB @ 11.81
    Bought WC @ 68.12
    Sold WDC @ 12.97
    #31     Jun 28, 2005
  2. toby


    Around 50%.....
    #32     Jun 28, 2005
  3. Hi Toby,
    I fell in love with Darvas' book the moment I read it. I just doesn't quite understand how to plot the boxes yet. Are there any illustrations of what a top is and what a bottom is?
    #33     Jun 29, 2005
  4. gmb1994


    #34     Jun 29, 2005
  5. I read the book about a month ago and created (and modified a different) EOD scan in Amibroker for the boxes, or stocks that seem to currently be in a box.

    I noticed that a few that you just bought didn't make it into the stocks that I found and was trying to figure out why.

    Can you share your key scan criteria?

    I was looking for things that had hit new highs in the last 120 days, which had formed both the top and bottom of the box as he defines it and had not broken out of that box. I then manually pull out those that don't have a nice upward trend.

    Also, do you include volume increase in your scan? I noticed that the ones on the Traders Tips page didn't seem to have any increasing volume criteria from what I could tell.


    #35     Jun 29, 2005
  6. toby


    Setting the Top

    The high that followed by three days of lower highs.

    Setting The Bottom

    The low that did not penetrate over 3 consecutive days.

    Hope this helps.
    #36     Jun 29, 2005
  7. toby


    #37     Jun 29, 2005
  8. toby


    My Scan Criteria:

    1. Stocks - NYSE Only
    2. Price - > $5
    3. New 52-Week High - Yes
    4. 52-Week High > 2 X 52-Week Low

    And I don't include volume increase in my scan.

    #38     Jun 29, 2005
  9. Thanks for the reply.

    I had not included the 2 x low, although I know that is in the book so I may incorporate it.

    My initial confusion was I didn't come up w/ LUB when I ran my scan so I thought maybe I had the wrong criteria.

    When I went back to look at LUB today I realized why - and the difference is that I may be interpreting the rules wrong - or you made your buy even though it wasn't exactly w/in the rules.

    My data has that on 6/16 it made a high of 11.80, which hadn't been broken for 3 days so that set the top. The next day, on 6/17 it set the bottom, at 10.77, which also through 6/24 had not been violated so the bottom was set at 10.77.

    According to my data on 6/27 the stock had a low (and open) of 10.67. This is where I might be confused. To me this violates the original box and there is now no longer a box.

    So it brings up a technical detail, which is - when you look for the highs and lows of the box are they from only the prior day, or do you take into account the highs and lows of the current day. Of course you take into account the high, since you buy once it crosses the high by even a tick - but do you ignore the fact that it broke below the box earlier in the day?

    Anyway, that is why it didn't come up on my scan; because the low had not held for the last 3 days.

    THoughts on that?

    Two other thoughts/questions:

    After reading the book and others (O'Neill, etc.) I was thinking about whether Darvas would work the same way today or not, which brings up 2 thoughts...

    1. Most people believe that a major push up is only validated w/ increasing or increased volume - so I wonder if Darvas had volume data whether he would have considered that. I was thinking of adding that as a criteria - not a huge increase but at least a modest increasing rate of volume.

    2. Is there a reason that you stay w/ the NYSE only? I know he did but the exchanges are very different today and I didn't know if there was a valid reason to stay this narrow today? I saw in an earlier post part of the reason was volitility and just the shear number of stocks but I was wondering if you would be better opening to other exchanges but putting some other criteria (like volume or height of the box as suggested by someone else) to limit the quantity?

    #39     Jun 29, 2005
  10. Do you know where can I find Darvas scan code for Metastock?
    I am not talking about the indicator, but the Explorer.

    Thank you in advance
    #40     Jun 29, 2005