How To Calculate Darvas Box To Measure Future of A Stock Price
Darvas boxes are a fairly simple indicator created by drawing a line along lows and highs. As you update the highs and lows over time, you will see rising boxes or falling boxes. Darvas box theory suggests only trading rising boxes and using the highs of the boxes that are breached to update the stop-loss orders.
Here for an Imaginary Stock 3 Darvas Box has been shown. These Boxes can be increased or decresed according to chart pattern and trend continuation.
First you have to find the initial Support and Resistance level and calculate the difference between them. As shown for this Imaginary stock Primary Support was 1161.947 and Resistance-1 was 1374.298.
This Difference from SUpport and Resistance-1 will be plain Box 1.
BOX 1 = (Resistance - Support) = 212.350
For Box 2 Support will be Rsistance-1 = 1374.298
And for Box 2 theory will be
BOX 2 = (Resistance-1 + Box 1 Price DIfference)
= 1374.298 + 212.350
= 1586.648
From Resistance-1 (Support for Box-2) to Price point 1586.648 will be it's Resistance-2
Resistance-2 = 1586.648 will be support for Box-3
Thus BOX 3 Rule will be,
BOX 3 = ( ( Resistance-2 + ( BOX 1 price difference * 2 ) )
= 1586.648 + (212.350*2)
= 1829.348
This 1829.348 will be Resistance-3 for Box 3
In the same way you can draw as much BOX necessary to predict your Price in Future.
