The new Darvas box trading 2.0 method combines what worked in the past with today’s tools to help refine the setup conditions and the trigger for the trade. This Darvas box trading 2.0 setup is long-only as detailed below:
- Use the 20-day and 50-day simple moving averages (SMAs) on the daily chart.
- Price is trading within 10% of an all-time high and above the 20-day and 50-day SMAs.
- Price stays within this 10% range for a minimum of three weeks. Support and resistance are established, forming a rectangle or box-like price pattern.
- Trade up through resistance on greater than 30-day average volume. Price closes above the previous price high.
- Enter on the opening of the following trading day.
Adding the SMAs acts as a filter to keep you in stocks that are trending higher and out of stocks whose price action is weak. Also, your entries are better timed by having a specific level of volume at the time of your entry to establish the quality of the breakout to the upside.