Friday, November 22, 2002 11:39:02 AM
MM, here is a compilation on Zeev Boxes:
--------------------------------------------------------------
I posted the following chart to illustrate a rectangle
pattern to another poster on Zeev's thread.
--------------------------------------------------------------
--------------------------------------------------------------
Zeev then posted the following message to me.
--------------------------------------------------------------
Augie, a good example of medium term "box" trading, with
one difference, your first stop loss is set under the bottom
of the last box (around 12.5), you raise that stop to just
below the bottom of the new box, only after that bottom has
been tested at least once (like just under $14.5). Then you
raise it again to just under the bottom of the next box (now
$15.5 to $16.75 or so, thus SL at about $15.25 (which should
be just above your buy at $15?), and if $16 holds over the
next few days you raise the stop to just under $16 and so
on... Mind you, even though we may be no in a cyclical bull
phase, quite a number of whipsaws should be expected. After
all, it is not a secular bull.... #msg-575769
--------------------------------------------------------------
I then asked Zeev a followup question
--------------------------------------------------------------
So, when you sometimes take more than one position in the
same stock, i.e., the day-trader/swinger combo, or the
swinger/position combo, you are holding the longer position
from one box to the next, (as you described), and buying-
selling-rebuying-etc the shorter position as it rebounds off
of box tops and/or bottoms. Is that a fair characterization?
--------------------------------------------------------------
And Zeev replied
--------------------------------------------------------------
Yup, for swing trades, not for day trading, there you have
three types of boxes, linear, ascending and descending, I
play all of them....
-------------------------------------------------------------
-------------------------------------------------------------
Meanwhile, over on SI, Steve Lee wrote a post to exp about
Zeev & Darvas Boxes,
-------------------------------------------------------------
Darvas used these boxes for multi day trading and did not
advocate using them for day trading. Zeev uses a modified
system and is obviously doing well with it.
The trading Darvas did involved using individual brealout
stocks on the way up only. I don't believe, from what I have
studied, that the system will work for an index. In fact the
system was derived to find and profit from stocks that are
acting in a special way, so by definition does not apply to
the market. It also uses the volatility within a range, which
again by definition, an index does not have to the same
extent that volatile single sotcks do. Look at the way Zeev
uses the Q, a quintet of particularly volatile stocks, for an
illustration of this. They are not just all bought at the
same time for their beta with the Nasdaq (although sometimes
it happens that way). Sometimes Zeev sells one Q member while
buying another.
As one Q member goes up and another goes down, the Nasdaq
index can be standing relatively still and thus not
presenting trading opportunities. #reply-18195791
-------------------------------------------------------------
To which Zeev replied
-------------------------------------------------------------
Steve, the pure Darvas approach should be used only in
bull markets, it is designed to try and keep you in a stock
for the whole bull move. One way to know that the trend
changes is if in a short period of 4 to 6 weeks, more than
20% of your stops (set under a Darvas Box) are taken out,
then you want to tighten the rest of your stop, or even get
out all together except special situations. (all IMTO). Using
the Darvas methos with one or two stocks only, assures
whipsaws, it got to be used with at least 15 different stocks
simultaneously, IMTO.
--------------------------------------------------------------
Steve responded
--------------------------------------------------------------
re 15+ stocks for Darvas method.
I can see the logic here Zeev. Lots of small losses and a
couple of big wins that more than compensate.
With only a couple of stocks you will just get a couple of
small losses. Unless you are lucky. But a system shouldn't
depend on luck.
I haven't tested but I think the system could work well for
shorting also as a way of finding "broken" stocks.
I also feel that now we are in the days of mass trading from
people using the net, levels of support and resistance are
not so clear cut as in the old pre bubble fractional price
days. So if Darvas were investing in the same way he would be
getting more whipsaws. I guess this is where your tweaks to
the method give you the advantage.
Anyway, I appreciate the comments because it is a system I am
interested in and your system is obviously successful so any
nuggets of info are gratefully lapped up (forgive the
bolded pup.. er... pun<g>).
--------------------------------------------------------------
Zeev replied
--------------------------------------------------------------
Steve, one improvement to the Darvas box is using it on a
5 minute chart (you got to program out outliers, tough, but
not impossible), it works only with Q like stocks that have
sufficient activity in 5 minutes windows. When you do that,
you can see that a channel up is a step function, and with
the Q, often a step will march few equivalent boxes at a
time. Furthermore, the boxes have "memory" of about two weeks
back (there I use hourly for the boxes), giving you area of
support and resistance for day trading forays. I hope it
helps. Analyze fe of the Q, and you will see that in
ascending markets the boxes are actually slanted (almost like
a parallelepiped). Don't wait to reenter at the bottom of the
box, always raise your reentry point.... The inverse in down
markets.
--------------------------------------------------------------
--------------------------------------------------------------
Finally:
1. Here is a website with general info about Darvas
Boxes -- http://www.gerryco.com/tech/darvas.html
2. There is an iHub thread on Darvas boxes, but it is not
very active -- #board-1362
MDA Thread #board-1320
Turnips Thread #board-1125
Trading Info #board-1220
Retrace #board-1345
PPT #board-1280
http://www.angelfire.lycos.com/goth/augieboo
--------------------------------------------------------------
I posted the following chart to illustrate a rectangle
pattern to another poster on Zeev's thread.
--------------------------------------------------------------
--------------------------------------------------------------
Zeev then posted the following message to me.
--------------------------------------------------------------
Augie, a good example of medium term "box" trading, with
one difference, your first stop loss is set under the bottom
of the last box (around 12.5), you raise that stop to just
below the bottom of the new box, only after that bottom has
been tested at least once (like just under $14.5). Then you
raise it again to just under the bottom of the next box (now
$15.5 to $16.75 or so, thus SL at about $15.25 (which should
be just above your buy at $15?), and if $16 holds over the
next few days you raise the stop to just under $16 and so
on... Mind you, even though we may be no in a cyclical bull
phase, quite a number of whipsaws should be expected. After
all, it is not a secular bull.... #msg-575769
--------------------------------------------------------------
I then asked Zeev a followup question
--------------------------------------------------------------
So, when you sometimes take more than one position in the
same stock, i.e., the day-trader/swinger combo, or the
swinger/position combo, you are holding the longer position
from one box to the next, (as you described), and buying-
selling-rebuying-etc the shorter position as it rebounds off
of box tops and/or bottoms. Is that a fair characterization?
--------------------------------------------------------------
And Zeev replied
--------------------------------------------------------------
Yup, for swing trades, not for day trading, there you have
three types of boxes, linear, ascending and descending, I
play all of them....
-------------------------------------------------------------
-------------------------------------------------------------
Meanwhile, over on SI, Steve Lee wrote a post to exp about
Zeev & Darvas Boxes,
-------------------------------------------------------------
Darvas used these boxes for multi day trading and did not
advocate using them for day trading. Zeev uses a modified
system and is obviously doing well with it.
The trading Darvas did involved using individual brealout
stocks on the way up only. I don't believe, from what I have
studied, that the system will work for an index. In fact the
system was derived to find and profit from stocks that are
acting in a special way, so by definition does not apply to
the market. It also uses the volatility within a range, which
again by definition, an index does not have to the same
extent that volatile single sotcks do. Look at the way Zeev
uses the Q, a quintet of particularly volatile stocks, for an
illustration of this. They are not just all bought at the
same time for their beta with the Nasdaq (although sometimes
it happens that way). Sometimes Zeev sells one Q member while
buying another.
As one Q member goes up and another goes down, the Nasdaq
index can be standing relatively still and thus not
presenting trading opportunities. #reply-18195791
-------------------------------------------------------------
To which Zeev replied
-------------------------------------------------------------
Steve, the pure Darvas approach should be used only in
bull markets, it is designed to try and keep you in a stock
for the whole bull move. One way to know that the trend
changes is if in a short period of 4 to 6 weeks, more than
20% of your stops (set under a Darvas Box) are taken out,
then you want to tighten the rest of your stop, or even get
out all together except special situations. (all IMTO). Using
the Darvas methos with one or two stocks only, assures
whipsaws, it got to be used with at least 15 different stocks
simultaneously, IMTO.
--------------------------------------------------------------
Steve responded
--------------------------------------------------------------
re 15+ stocks for Darvas method.
I can see the logic here Zeev. Lots of small losses and a
couple of big wins that more than compensate.
With only a couple of stocks you will just get a couple of
small losses. Unless you are lucky. But a system shouldn't
depend on luck.
I haven't tested but I think the system could work well for
shorting also as a way of finding "broken" stocks.
I also feel that now we are in the days of mass trading from
people using the net, levels of support and resistance are
not so clear cut as in the old pre bubble fractional price
days. So if Darvas were investing in the same way he would be
getting more whipsaws. I guess this is where your tweaks to
the method give you the advantage.
Anyway, I appreciate the comments because it is a system I am
interested in and your system is obviously successful so any
nuggets of info are gratefully lapped up (forgive the
bolded pup.. er... pun<g>).
--------------------------------------------------------------
Zeev replied
--------------------------------------------------------------
Steve, one improvement to the Darvas box is using it on a
5 minute chart (you got to program out outliers, tough, but
not impossible), it works only with Q like stocks that have
sufficient activity in 5 minutes windows. When you do that,
you can see that a channel up is a step function, and with
the Q, often a step will march few equivalent boxes at a
time. Furthermore, the boxes have "memory" of about two weeks
back (there I use hourly for the boxes), giving you area of
support and resistance for day trading forays. I hope it
helps. Analyze fe of the Q, and you will see that in
ascending markets the boxes are actually slanted (almost like
a parallelepiped). Don't wait to reenter at the bottom of the
box, always raise your reentry point.... The inverse in down
markets.
--------------------------------------------------------------
--------------------------------------------------------------
Finally:
1. Here is a website with general info about Darvas
Boxes -- http://www.gerryco.com/tech/darvas.html
2. There is an iHub thread on Darvas boxes, but it is not
very active -- #board-1362
MDA Thread #board-1320
Turnips Thread #board-1125
Trading Info #board-1220
Retrace #board-1345
PPT #board-1280
http://www.angelfire.lycos.com/goth/augieboo
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