Darvas Box Indicator Session and Q&A

V1.0
Mark Koops
Monday 16th of October, 2023

Get in touch:
Email: koops@[Link]
Of cial website: [Link]
Twitter: [Link]
Youtube: [Link]
Discord: [Link]
Instagram: [Link]

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 Disclaimer

FOR GENERAL INFORMATION PURPOSES ONLY, NOT FINANCIAL ADVICE. All information
presented in this report references an opinion of the author and is for general information
purposes only. You must not construe any information presented as legal, tax, investment,
nancial, or other advice. Nothing presented constitutes a solicitation, recommendation,
endorsement, or offer to buy or sell nancial instruments. I am not a licensed nancial advisor or
registered investment advisor. For nancial or investment advice, seek a duly licensed
professional in your jurisdiction, who can take your speci c situation into account. Past
performance does not indicate future results. You are always at high risk of losing all invested
funds. I don’t give advice to buy or sell speci c assets. The education and soſtware tools are
timeless and generic for any asset. Rather than relying on subjective market opinions, I apply the
principles of technical analysis on historical charts. Anyone can apply the same process and get
the same result. Technical Analysis does not predict the future. It is a tool to nd setups for
controlled risk/reward. Darvas Box, Larsson Line and all other TA tools do not predict the future.
They are mathematical formulas for trend expression. Disclosure: I own various Commodities and
Commodity Companies in my personal capacity, and may also hold exposure to other assets. My
objective with this report is to help you re ect on and improve your own analysis, not to replace it.

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Preface

I wrote in my 15 September 2023 newsletter about the Darvas Box Trading methodology. CTO
Larsson invented the Larsson Line, and it has become a stable in my TA arsenal. But, that
triggered me to see if there are other potential tools to be developed, which can further improve
my own TA, as I do not depend on only 1 tool - I use a whole set for my TA.

In this document I like to outline more details, and answer the various questions I have received.
This document will remain a “work-in-progress”, as in that I will continuously add to it when new
questions or clari cations are required. The rst section will focus on the general principles
behind the Darvas Box, and the second section will focus on addressing the various inquiries of
The Commodity Community.

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 Introduction

In my search for other TA tools, I stumbled upon a book from Nicholas Darvas early 2023 titled
“How I made $2.000.000,- in the stock market” as well as the book “You can still make it in the
market”. He has written some more books, but these are the 2 I spend most of my time studying
intently.

But rst, who was Darvas ? He was Hungarian by birth, born in 1920. Nicolas Darvas trained as
an economist at the University of Budapest. Reluctant to remain in Hungary until either the Nazis
or the Soviets took over, he ed at the age of 23 with a forged exit visa and fty pounds sterling to
stave off hunger in Istanbul, Turkey. During his off hours as a professional dancer, traveling the
world, he read 200+ books on the market and the great speculators. Darvas invested his money
into a couple of stocks that had been hitting their 52-week high. He was initially surprised that the
stocks continued to rise and subsequently sold them to make a large pro t. His main source for
his stock selection was Barron's magazine. At the age of 39, after accumulating his fortune,
Darvas documented his techniques. The rst book describes his unique 'box system', which he
used to buy and sell stocks, and the second book provides a signi cant number of clari cations
as to how to actually use it. Note: for those of you who really want to squeeze everything out of
the Darvas “lemon”, I suggest purchasing both books. The rst being mostly focused on the
theory and background, while the second is a more practical book focused on the application of
the theory.

The reason I was intrigued by both of his books, was for multiple reasons:
1. The idea that someone wrote a “recipe” to make $2.000.000,- in the stock market sounds too
good to be true, but is it ? Only one way to nd out - try it myself.
2. Darvas was wrestling with an issue, which I am wrestling with regularly: once a stock breaks
above its ATH, or at least an ATH in the past 3 to 5 years, how do you know when to exit ?
Sometimes there are pull backs, and then the trend resumes, and sometimes there are pull
backs, which, after the fact, you wished you had used to exit the trade. With most
commodities, and Commodity Companies, we are exactly in that situation - for example
Uranium right at this time: whether the commodity is about to, or has, broken out.
3. Darvas, because of his very heavy travel schedule, as he was dancing globally, used
telegrams for trading, and so not only did he need a way of communicating with the broker
which was highly ef cient (which means he needed to be very speci c, to the point and
concise - which in my view is what is required of a trader), he also did not get updated
information on a continuous basis like we do - but only every few days / week. His

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 methodology would allow me to not “frantically” stare at my brokerage account continuously,
but potentially take a more hands off approach, and allow me to focus on other things in life
as well.
4. After (thinking that I) properly understood his tool, technique and approach, I proceeded to
research existing Darvas Box implementations on TradingView. And, to my surprise, of the
approx. 20+ I analysed and used, none of them properly implemented the methodology. Yes,
none of them. And that, to me, then resulted in me deciding to implement it myself. After all,
what is the point of implementations on TradingView which erroneously implemented a
proved successful trading technique ?
5. Finally, for Darvas studying 200+ books and developing his own system successfully, I was
highly intrigued to learn what he uncovered, and add it to my own arsenal of tools.

Now, it has been 23 years since the last time I did SW Development, and so “rusty” would be an
understatement. The rst week was tough :-D. However, after 2 weeks I had the core of the code
developed, and another 2 weeks later it was beauti ed up to where I am comfortable in sharing it
with the larger community, similar as CTO has done with Larsson Line.

The Darvas Box code, is the result of many weeks of research, and weeks of reading both books,
each 3 times, to really absorb the subject matter and make it my own. My implementation in
TradingView, is highly con gurable, as I know that there will be many questions once people try it
out. “Why does the box start here ?” “Why do we exit the trade there ?” etc. To be able for
everyone to understand the logic behind it, I implemented Green and Red arrows (for the entry
and the exit). I made all colours for the various type of boxes con gurable, so it will satisfy your
own colour palette. And, nally, I implemented for each box under construction (as part of the
“current” timeframe, the “buy” levels, including the stop-loss level, so that TradingView shows you
the actual buy and stop-loss levels I would enter in my brokerage.

Clearly, this tool is not an answer to everything TA, but I use it in close relationship with the
Larsson Line, a momentum indicator, RSI, Volume, VRVP and MA and a solid understanding of
the cycles which Commodities are going through. It simply is another tool on my tool belt. Please
note, that Darvas never developed his Darvas Box for Commodities. In fact - he was trading
highly volatile stocks which were breaking out from their ATHs and he never tried to apply it to
commodities. When applying it to Uranium, Gold, Silver, Oil and other related Commodity
Companies, it is astounding to me that it works and nobody (seems ?) to have tried this and
made it public. The only person who I note, mentioned Darvas in a single tweet the past years
within the context of Silver, was Peter Brandt.

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 I will not bore you here with all the principles, but share some of the main ones for an uptrend
(e.g. longing the market. Shorting the market would work exactly the opposite):
1. When the price of a rapidly rising stock (pls note: rapidly rising is key - we are not interested
in a sideways trend) is reaching a resistance point, which is does not surpass for three or
more consecutive days, that point represents the top of the box.
2. If, after falling from the upper limit, the stock reaches a downward resistance point which it
does not penetrate for three of more consecutive days, that level represents the bottom of the
box.
3. A stock is in a rising trend when it is in the topmost box. As long as it remains there, its price
uctuations should be ignored and the stock is a HOLD.
4. If the price of the stock moves above the top of this topmost box, this stock becomes a BUY.
A 10% stop-loss should be set at the break out.
5. Having formed a new higher box, if the price falls below the bottom into the stop-loss area of
this box, the stock is a SELL.
6. There is no reason to HOLD or BUY a stock that is not in its topmost box.
7. In case a candle pierces out of the top of the box while establishing the bottom of the box, the
box is invalidated.
8. In addition, two other key principles need to be adhered to:
1. The stocks price must be at or above its ATH for the past 3 years or more.
2. The volume pro le needs to indicate a rapidly growing volume or insider buying (e.g. a
volume spike).

Darvas had some more rules, but these are the most essential ones to start off with. The whole
intend is to minimise risk and losses, and maximise upside and pro t.

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Below a picture of Cameco - CCJ, with the boxes enabled.

A Yellow box is drawn the moment the breakout happens at the top of the box (bullish in an
uptrend) and a Blue box in case the box broke down - eg. the breakout happened on the
downside.

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In the following picture you will see that the trend is clearly upwards (mostly Yellow boxes), and
that Cameco just broke out of the last box:

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 The next image shows a typical buy signal, including where to put a stop-loss. This assumes you
have no existing position or want to add to an existing position upon the break out. Speci cally:
you buy the UX1! the moment it breaks out at 65.15 and you put a stop-loss at 57.45.

Let us assume that you have already a position in UX1!. IF the price in this case drops below the
lower support, you need to be ready to sell at 43.55. I have made all of these signals fully
con gurable, and so while the current set up is aligned with the Darvas books, you can adjust
them based on your own experience and expected performance. The reason I implemented it as
such, is that this takes away part of the emotion of trading, and provides you with a very visual
image of buy/sell signals.
The box is not yet coloured Blue or Yellow, but grey, as the colour is decided only upon breakout/
breakdown.

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What you can also see is that the indicator works on all different timeframes. Pls make sure to
use the appropriate timeframe aligned with your trading style (daily is recommended) and do not
mix timeframes for buy/sell signals.

Finally, as mentioned above, I do not use solely the Darvas Box, but I use it in unison with a set of
trading tools, like MA, RSI, Momentum Indicator, Larsson Line ([Link]), VRVP and
Fundamental Analysis. As such, the Darvas Box Indicator can help me con rm an action, and
allow me to enter a trade early, can con rm getting out of a trade etc. But, I do not use it on its
own or solely.

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 Q&A

I like to start off by saying that I appreciate any and all questions - there are no “dumb” questions,
only people who like to learn and grow, and so if you are not sure on your question, please post
it. Worse case I have to answer a question a couple of times or refer to another question :-)

Question 1: how do I use the 2 stop-losses shown together with the Grey box ?

I’m trying to understand the instructions for using the indicator, and it mentions that when a grey
box is drawn, it’ll indicate a buy and stop-loss. In the example here, I have a buy at 128.55, but
there are 2 stop-losses. So I think I’m supposed to place an order at 128.55, and if I eventually
get lled, I would immediately place a stop at 119.73? Is that correct? If so, what is the other stop-
loss for? Is that for if you placed a buy order at the current spot price?

Answer: You are correct. There is a stop-loss for when you buy upon the break out (at 119.73),
and assuming you are already in an existing trade or set of trades, the stop-loss for all previous
trades is the stop-loss below the box. This get triggered in case we break down below the grey
box.

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 Question 2: Why doesn’t the indicator check if we are above 3 year ATH
automatically ?

It's kinda misleading to see the boxes on charts where it simply doesn't apply. Thoughts?

Answer: Purposefully - rst, I made the indicator con gurable related to the ATH historical
timeframe, inline with the description of Darvas in his book. He is suggesting a time between 3 to
5 years. Hence, depending on the asset and personal preference you can adjust the ATH
timeframe. I have however not restricted it to only 3-5 years. Also, I like sometimes to see the
boxes to understand the type of market we are in (sideways market has up/down boxes etc).
Lastly, many people want to trade not only break outs, and so this can still help you to set targets
and stop-loss values.

Question 3: I have 4 questions.

a. Why does it say to consider only stocks that are at all time high, at least for last 3 years? I
mean, is that realistic?
b. The second question regards forming box and levels where to enter and exit; there is no
entry level on the bottom of the box. Is it at the top of the red part? Or is it not a good tactic to
enter at the bottom of the box? On the other hand why is there a stop-loss if not?
c. Third would be a follow up on the rst. Usually when something is rapidly rising it doesn't
even form boxes so if you don't enter after rst yellow box or at the rst part of the run I guess
it is just trying to chase.
d. Fourth: is there way to see entry and stop-loss levels of formed boxes? Anyway great tool
and great community here. Best to all.

Answers:
a. The idea behind this was for Darvas to purely focus on rapidly rising stocks and the stocks
which typically rise (without resistance) are stocks at their ATH. Stocks which are at their ATH
after 3 to 5 years typically do not have strong support / resistance levels at that level, and
hence the move up can be less hampered and more explosive.
b. The entry is upon the breakout on the top of the box. The stop-loss is set a few % below that
(con gurable, default for Darvas was 10%). IF you are already in a position or set of
positions, the exit for those is below the bottom of the box, upon a breakdown on the
downside of the box,

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c. First buy is upon breaking out from the ATH. If the ATH in the past 3 years was let's say 10,
you buy just above the 10. That is the entry. If the stock continues rising, as per this
methodology, you do not buy, only up until a new box has formed, and is broken out of, from
the top. This allows you to set a proper stop-loss and to add to your position at that time.
d. In principle this could be shown, but as there is no opportunity to enter or exit in the past, I did
not see much value in it and hence removed the code to do so. Also, it makes the chart a bit
messy with too many boxes and numbers. Finally, if you have purchased on the breakout of
previous boxes, your broker will have that information as part of your trade and purchase
receipt.

Question 4: in the video <below> they mention a 52 week top, not the 3 year you
describe.

[Link]

Is that because of commodity cycles are so long apart? I got this golden box which price is about
to go below, considering putting a stop-loss at the bottom of the box taking some pro t, BUT the
box isn't the highest in the past 3 years, but it its the highest within the past 52 weeks. Not asking
you what I should do, and won't hold you to anything I choose to do, and I guess if i'd strictly
followed the 3 year rule, I wouldn't be in this position, but too late for that. My options are, sit on
my hands, and wait out the volatility, set a stop-loss very close to price now (bottom of current
yellow box) for a portion of my position, dump my whole position at aforementioned stop-loss.

Answer: In the video, the 1 year timeframe top is not as per Darvas’ methodology. This is akin to
many implementations on TradingView as well - where the author is actually implementing (or
explaining) his/her version of the strategy, but not one which is aligned with Darvas’ books. In
terms of actions, it is dif cult for me to be speci c as I do not know the company you are looking
at. For me it is a mix of fundamental and technical analysis, together with a nancial plan. Earlier
in the video, the narrator explained that Darvas was looking to gain approx. 100% on a risk of
$400. This would be my feedback: if you are trading a very small position of your portfolio, which
you are comfortable with, then no need to sell and take a loss. But, you need to de ne the exit
criteria before you enter a trade. Setting criteria after a trade, will not work. Second, do not trade
positions which are too big and keep you awake at night, or re ecting on continuously. Finally,
make sure your investments/speculations are in companies you are comfortable with. Uranium
has huge price swings and that will shake out many investors due to that volatility. However, if
you can lean to be comfortable with it, it can generate a lot of pro t. Some of the “trick” which

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works for me, is: know the company you invest in, make sure it is a top company, do not diversify
too much (or at all), invest what you can lose, de ne the pro t targets and stop-loss targets
upfront, and do not check your broker app daily. Once you are comfortable in this regard, you can
spread out into more risky plays.

Question 5: Darvas box is essentially a range formed at an ATH (looking 3 years

back in our case), and you buy the breakout, with a stop-loss below ?

So, I was thinking. In crypto, fakeouts are very common, where manipulators apparently love to
push around the price to sweep shorts/longs above/below ranges, only for price to then return
back into the range. Is this just a hypothetical issue that doesn't matter in practice, and/or
perhaps not as common with commodities?

Answer: This is a very common situation, which even started to happen when Darvas wrote his
second book “You can still make it in the market”. He described a technique where he would
either set his stop-loss a bit lower (to allow for a bigger pull back) as well as a technique where
he would buy after a pull back to the breakout level, had happened. This technique may cost you
in trades, as there are not always pul backs to the level, and that would leave you out of the
trade. His stop-loss technique has always been a bit open to his own emotions - his stop-loss
would be set and adjusted based on how he “felt” the stock would behave. And, while I cannot
describe it, I have learned the same thing: to “feel” a stock and how it will behave. I will quote my
AG (First Majestic Silver) stock as an example. As I have acquired a feeling for it, I have been
pretty accurate in predicting its behaviour and capitalising on it (together with FA and all TA tools).
However, the “feeling” is rooted in a very deep conviction on the company behind the stock,
rooted in knowing their management team, results, way of working etc.

Question 6: in the Darvas box/strategy, candle wicks are apparently used in favour
of bodies, is there a rationale behind that?

Answer: this is the methodology Darvas used. If not, with all volatility, you would be both stopped
out earlier as well as have signi cant less trades. Boxes are invalidated with wicks piercing as
well.

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Question 7: Can someone kindly clarify what sections of the Darvas Box mean ?

For example, this is what I’m seeing for Shopify (1D) (Red, green and grey).

Answer: I have provided a detailed explanation in the introduction above. Please also see the
answer to Question 1.

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 Question 8: What is the timeframe y'all are using in TV for Darvas Box (would DB
be a bad shorthand)?

Trying to gure out this new tool...for example, does it look as though CCJ is creating a new box
with it's recent ATH and this recent low? If so, how long do we give it to form the box?

Answer: I tend to us the Darvas Box on the daily and weekly scale, and rarely on the monthly. I
cannot comment on hourly or smaller timeframes as I have never used it in those scenarios, and
given that Darvas used Telegrams which took days to reach him, he also did not invent his
strategy, with such short timeframes in mind. Moreover, he also did not intend it for long
timeframes, as at one point he wrote that a stock going sideways for 3 weeks or more, was not
worth investing in.

The tool will automatically draw a grey box as soon as the criteria for a box have been satis ed:
1. When the price of a rapidly rising stock (pls note: rapidly rising is key - we are not interested
in a sideways trend) is reaching a resistance point, which is does not surpass for three or
more consecutive days, that point represents the top of the box.
2. If, after falling from the upper limit, the stock reaches a downward resistance point which it
does not penetrate for three of more consecutive days, that level represents the bottom of the
box.

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Question 9: what's the best way to integrate DB with Larsson Line (LL) ?

Will DB and LL automatically work in parallel since DB is based on ATHs?

Answer: I will provide some examples below, but pls note that there is no one size ts all
methodology. It is a combination of signals which needs to be interpreted by yourself, and
decisions are then made based on probabilities.

Let us look at the Sprott Physical Uranium Trust in this example.

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I am using the weekly chart in this case - as this indicates trends better. I will zoom in on part of
the chart below, and let us look at that in more detail:

As we can see, after the COVID low, [Link] had a nice run up on good volume, and a Darvas Box
formed, which turned Blue. At the same time, LL had turned Yellow on the rst Blue Weekly
candle in the box, and hence LL provided a “buy” signal. Question is: what action would you take:
sell upon the low of the box being pierced, or keep the position based on LL being yellow. In case
of selling with the Darvas Box, the nancial exposure would have been less than with LL.

Now, let us look at the Yellow Darvas Box which was formed shortly after, in the same pic. It
offers a good “buy” signal, although the Buy Signal from LL would have allowed us to enter the
trade earlier, and at a better price.

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Let us assume we bought either signal, also on good volume. Following LL process, we would
still be in the trade today, with nice pro ts. Following the Darvas Box process, depending on
where we would have put the stop-loss for the second blue box, we could have been stopped out
of the trade (red ellipse). Yes, we would have made a pro t, but we would have been out of the
trade.

One could argue though, that the Darvas Box methodology is focused around rapidly increasing
stocks, and [Link] went sideways for approx. 1 year. This is true: if you have other options to
deploy your capital, which were more favorably set up, it would have likely resulted in a better
return on capital invested, versus [Link]. However, also likely at more risk (additional trades etc).

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Pls see the Red highlighted sideways pattern (daily chart for more clarity):

And, in the next picture I am showing all Darvas Boxes, not only from 3 year ATH. It clearly shows
a sideways trend based on alternating Blue and Yellow boxes.

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 What is interesting though, is the new Darvas Box being drawn on the chart. And, the way I
interpret this box is as follows:

1. Clear Entry and Exit Criteria

2. LL is Yellow - Bullish
3. RSI is Neutral from overbought levels
4. Increasing Volume
5. Above 50 MA
6. At the higher VRVP levels
7. With momentum coming off a little (Red)
8. FA (simpli ed):
9. Lack of supply and rapidly growing demand, governmental support for Nuclear.
10. [Link] Discount to NAV -5.5%
11. ETF In ows are strong
12. Target price for [Link], based on in ation adjusted ATH would be 210.

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My options, assuming that I wanted to buy [Link], and I am planning to hold for a year-or-longer, I
take it as that we are close to, or have already seen, a bottom:
1. Buy as per the Darvas Methodology including the stop-losses.
2. Buy at the current support (20.20) with a tight stop-loss below, potentially at the 50 MA
(20.60)
3. Buy once the diagonal resistance has been crossed, and backtested, with a tight stop-loss.
4. Buy once we hit a higher high, with a tight stop-loss.
5. …and I am sure you have various others.

Bottomline, based on the above, I personally would trade based on Option 2.

Clearly, there are more ways of combining the LL and Darvas Box tools - in my case I am using
both TA and FA tools to come to a risk/reward ratio on the basis of which I am willing to make the
trade. For me it is all about the alignment between the various tools we have in our arsenal, and
are comfortable with.

Question 10: Here are some suggestions for questions ?

1. How do you use it: what's your process ?

2. Which time frames do you use it on mostly? Which, in your experience, is most reliable?
3. Can you show us a trade you've taken where the indicator was a key factor (along with other
indicators/TA).
4. Are there any times when you have ignored the indicator, and for what reasons.

Answer: Let me try and address the questions one-by-one.

1. In my process I am rst and foremost oriented on a list of companies I like to invest /
speculate in. I do not just look at charts and TA and based on that decide to buy something.
The fundamentals of the companies matter, and so that is key. They management, their
results, their nancial situation, their market cap, their performance in comparison to their
peers, etc. Once I have a list of companies I want to invest in, I then regularly check if the
various indicators I am using, are aligning. I check rst what the overall direction of the
market is, and if that is positive, then I validate all indicators are pointing in the right direction.
I decide which commodity company to invest in based on ratio charts. Once all of that that is
in place, I then like to buy at support, with a tight stop-loss to protect my downside.
Sometimes I leave my stop-loss less tight, as knowing how volatile this market is, I may not
want to be stopped out purely due to volatility alone.

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 2. I do my overall fundamental analysis based on years, my company analysis based on weeks
and days. I buy based on daily charts.
3. I hope my answer to Question 9 provides a practical overview.
4. Yes, an indicator is merely a tool. To me the fundamentals matter more. We are in a
commodities bull market. Speci cally for Uranium, Oil&Gas, Gold and Silver at the time of
this writing. That means that sometimes the market will pull back 50%. There is no analysis
which will allow you to get through this with no losses. Only compounding your wins will give
you outsized returns. Compounding takes time.

Question 11: As I understand it the Darvas box is suited for companies that are
reaching all time highs or a new high in the last 3 years ?

Can you talk about it’s usefulness outside of that situation and it’s perceived reliability if is more of
a local high scenario?

Answer: The Darvas Boxes drawn outside of ATH, can be used to understand the direction of the
market, and can offer other trading entry opportunities and help provide stop-loss levels.

Question 12: The indicator shows up as V2.0 not V2.1. Is it a bug ?

Answer: This issue has been xed, the indicator release is now shown properly (V2.1).

Question 13: My Kryptonite is exiting a Trade. I don’t have a good strategy, just
DCAing out at a subjective suf cient pro t ?

Do you have some thoughts on good practice for exiting in the video ?

Answer: Purely within the con nes of the Darvas Box Indicator, the buy and sell levels are very
well de ned. There is no DCAing out of a trade, only a complete liquidation from ones position
once the stop-loss is hit.

Of course there are 2 scenarios: selling when in loss, or selling when in pro t. Selling when in a
loss should be done purely based on unemotional stop-loss - as protecting the trading capital is
key. No trading capital means no opportunity to make money in the market and so that downside
needs to be protected at all costs. Selling when in pro t is different, the question is now: how can
I maximize my pro ts. First, making pro ts is what counts, and then compounding them.

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Compounding pro t after pro t over time will rapidly increase your portfolio size. I do not know
what type of trader you are - are you a day trader, are you a swing trader, a scalper or a stacker ?
Each trading strategy has its own way of managing entries and exits. I personally am using 2
strategies mainly:
I like to take a big chunk out of the area between the bottom and the top of the market. I know I
will never buy or sell at the bottom and the top, so my aim is to get a good coverage across it. My
scaling out of a multi-year position is based on rst and foremost the fundamentals, how the
company is performing etc (see Question 10). In addition, I do like to swing trade in a bull market
to add some alpha to my performance based on stocks with which I am familiar. Given that we
are in a bull market, even in case I make a mistake, with an overall trend up, losses are
minimized.

Question 14: Could you talk about Stop-losses ?

Both within the Darvas method, and how you set them in general? With some speci c examples.
Would be much appreciated!

Answer: Please see Question 9 and my examples of entering the trade - does this address your
question ?

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