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Darvis Box Theory for E-Mini Trading

The original Darvis concept was a system for trading stocks developed in the 1950s by Nicholas Darvis, who had a unique career as a ballroom dancer of the highest order combined with a driving desire to be successful in the stock market. During my career I have seen this excellent indicator go in and out of favor with the retail trader. On the other hand, it is common to find Darvis boxes' on many of the charts the professional traders with whom I am acquainted. Why? When used properly this can be one of the most powerful real-time trading tools to possess. The problem is that many individuals tend to slap the indicator on their chart without researching and understanding some of the trade parameters, both positive and negative. If you understand how to trade the Darvis box it can be a powerful boost in your trading efficiency.

Even modern Darvis theory for stock trading is based upon the minimum of six months. So how did e- mini traders abscond with this rather mundane stock trading system and make it into a powerful trading tool? E-mini scalpers found that the indicator was fractal in nature, which is to say that it had similar results over varying time periods. The modern day trader of this indicator will be using an algorithmically different formula than Darvis could have imagined, but some of the original technique remains the same today.

Depending upon how you set the indicator settings, the indicator begins to form boxes around price clusters. The indicator tends to mirror near-term support and resistance and a break of an indicator line may indicate a breakout, if certain conditions are met. If the clusters form in a trending market this continuation pattern has a high probability of continuing in the direction of the original trend. An aggressive trader would buy at the lowest point of the channel; while a more conservative investor would buy when the price broke through the resistance line of that particular box.

Since I am not a systems based or mechanical-based trader, knowing near-term resistance and support and having a time-tested trading methodology to get an early start on a move in your desired direction can often add 10 ticks to an ordinary trade. If you add order flow software, and volume, you can closely monitor the trade direction by observing traders hit the bid and ask side of the contract.

There are scads of articles on the Internet and almost as many systems based upon the Darvis indicator for your perusal. To be sure, I developed my own set of rules after using this indicator for several years. This can be a versatile tool for your personal trading system and I highly recommend sampling some of the Darvis breakout and breakdown patterns so you can predict short-term market direction with reasonable accuracy. As always, best of luck in your trading.

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