He graduated as an economist in Hungary, but later became a famous dancer around the world at the time of Second World War. He travelled and danced around through the planet and became a famous and successful show dancer. Once in Canada after his show the club owner didn't have enough cash and as a compensation, Darvas received 3000 pieces of Brilund stocks, a Canadian mine company's paper. He didn’t check the price of the stock for two month, but after when he realized that tripled its worth he decided to start investing into stock business.
All of us had already this experiment. At the first trade we made nice profit and we started to believe we are the best traders on the world. He did as well. He started to subscribe to broker’s letters, he read all books about the markets. But you know what happened? He lost everything.
After two years of losing he decided to choose his own way and he invented the Darvas Box Theory. He considered the stocks are moving in waves in bull markets. After huge rallies the stocks are consolidating for a while and break out only, if the sentiment is still strong bullish enough. When the stock was in a box, he was flat and waited for proper time. He bought when the price broke out of the box. He was a perfect trendfollower, didn't want to create the trend only wanted to follow it. He simultaneously set a stop-loss order just under opening price. All in all he traded only the breakouts, and used daily chart timeframe. Here is below a chart template for his box theory.
With his new approach – the box system, he came up and made 2,45 million dollar fortune – now it is worth more than 20 million dollar– within 18 month in 1957-58. Basically Darvas never sold short, but realized that his system might be easily be adapted to short markets too.
If you want to read more about Darvas Box Theory you have to check his book, "How I Made 2,000,000 in the Stock Market," published in 1960.
The BFM Assets Team.
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