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Something Darvas, Something New

CLASSIC TECHNIQUES Modif ing The Darvas Technique For Toda 's Markets

Some hing Da a , Some hing Ne

b Dar l Gupp In the Ma 2005 STOCKS & COMMODITIES, Dar l Gupp discussed classic Darvas-st le trading. Here, he modifies the technique to fit modern-da markets, given that markets are more volatile these da s than the were in the 1960s.

The i c ea ed

a ii f de -da adi g ha ed ced he i c ee e f he Da a a ach, hich a igi a de e ed a d a ied e a ie a e . The Da a b a d aii ga ach i de ig ed ee i a g- e ead e d, i ce he e e e ai a e ed f e e ded e i d i he face f b a ia ice e . B i he a ie a e f da , hi i d f a eg c d e e a e ec ed high e e f i . T b i g hi c a ic adi g e i de a e , I ade f difica i . Each difica i i c i e i h he de i g gic f he Da a e h d. MODERN DARVAS RULES The e e ae h i b d:

T ade i ini ia ed b a ne high fo he olling 12- o i -mon h pe iod. A e deci i a e ba ed he high f he ice e ie . All e i deci ion a e ba ed on he clo e of he e ie . E ac i i igge ed b he fi ade a he igge ice. E i ac ion i managed on he da af e he igge clo e. Ac i i igge ed b he c e. S op-lo calc la ion e gho bo e he e nece a o handle mode n ola ili . The ig ifica cha ge i i g he c e i i ia e ade e ie a d e i . A h gh hi i a i cha ge, i d e b a ia i c ea e he e iabii f Da a - e adi g i de a e .

Si ce he Da a adi g a ach a de e ed i a a e he e high a ii a a, he igi a a ach ed he b f he ece D_B a a i . The i a ai ed af e a e D_B had bee f ed. The i if ed ad a eg a ba i a d d e ag fa behi d he c e ice ac i . I de a e , ice fe e ad e ic i a ica e -d i e ha
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Something Darvas, Something New

trend. There is no threat to the underl ing trend in this action, but the speed of the move is not adequatel managed using the Darvas stop-loss approach. To accommodate for this, I developed a "ghost" D_Bo (Figure 1).

FIGURE 1: BOX STACKING. He e, gho D_Bo e a e ed a a ola ili op-lo ol ion. No e ho he ailing op a e ba ed on he heigh of he la bo . ...Continued in the June issue of Technical Analysis of STOCKS & COMMODITIES Excerpted from an article originally published in the June 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. Copyright 2005, Technical Analysis, Inc.

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