Darvas box scanner: how the Darvas box works

The Darvas box is a way of drawing a trading range around a stock that is making new highs. Price is “boxed” between a top and a bottom, and a close above the top is read as a breakout. It is named after Nicolas Darvas, a dancer turned trader who described it in a 1960 book.

Watch the Popular Scans, including Darvas box, in the scanner (Hindi, from 8:51).

How the box is built

• Start near a high: the stock is within about 5% of its 52-week high.
• The top: a high that is not exceeded for the next three sessions becomes the box top.
• The bottom: the lowest low after the top that holds for three sessions becomes the box bottom.
• The outcome: a close above the top ends the box as a breakout. A close below the bottom cancels it.

What a Darvas box tells you

A stock that keeps trading in a tight range just under a high is being absorbed by buyers rather than sold. A tall box means wide swings and a looser setup; a short box means price is tight, which usually makes risk easier to define because the stop sits just under the bottom.

Darvas box screens in the scanner

The scanner includes two ready-made Darvas screens: Darvas box breakouts (stocks that closed above a box top in the last five sessions, with a high RS rating) and Inside a Darvas box (a complete box no taller than about 15%, with price within 5% of the top). Both appear in Popular Scans and as a full screen with your own settings.

Darvas box compared with other setups

A Darvas box is similar in spirit to the cup with handle and the VCP: all look for a quiet pause below a high before a possible breakout. The Darvas box is simpler and mechanical, which makes it easy to scan for and to test.

A worked example

A stock trades near its 52-week high and reaches 200. The next three sessions do not exceed 200, so the box top is 200. After that, its lowest low is 186 and holds for three sessions, so the box bottom is 186. The box is 14 points, about 7% tall. A close at 203 breaks out of the box; a close at 184 cancels it. The bottom gives a natural place for a stop.

Strategy examples

These are illustrative rule sets that show how the scanner can be used. They are not recommendations or advice, the numbers are examples, and rules like these can lose money. Test any idea on your own and manage risk before acting.

Breakout list

1. Open the Darvas box breakouts screen (closed above a box top in the last five sessions, RS 70 or higher).
2. Open each chart and check the box was short and the stock was near its high.
3. Check that the breakout day had higher-than-average volume.
4. Set the stop just below the box bottom and size the position from that distance.

Boxes to watch

1. Open the Inside a Darvas box screen (box no taller than about 15%, price within 5% of the top).
2. Add the tightest boxes to a watchlist with an alert just above the top.
3. Remove any that close below the bottom.

Market-gated Darvas

1. Check the breadth view first.
2. Act on breakouts only when the share of stocks above their 50-day average is rising.
3. In weak markets, use the screen as a watch list, not a trade list.

Common mistakes

• Drawing boxes after the fact, which hides the ones that failed.
• Using very tall boxes. The stop gets too far away.
• Treating a close above the top as a guarantee.
• Ignoring volume and the market’s trend.

Frequently asked questions

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