By David Adams
While I would not discount oscillators and indicators as important parts of a e-mini trader’s arsenal, all the important action in my trading occurs on the chart graph. Price action is everything and the patterns of support and resistance formed by price action are the basis for my e-mini trading. Which is not to say that I am not interested in oscillators and indicators, only that I use these tools to confirm my potential setups gleaned from the price chart. Although often overlooked, the venerable Darvis box is also one of the neatest and most efficient indicators in my trading.
I wasn’t always interested in the Darvis box, and I have to give credit to a well-known trader named Hubert Centers for initiating me into the finer points of this trading method. As time has gone by I have learned to rely upon this diminutive indicator for a variety of purposes.
At its very simplest explanation, one need only observe the rising or falling of successive boxes to get an instant and in-depth view of where and how the market is moving. When each box is formed and upper boundary of that particular price movement is formed and vice versa for the lower boundary of the box. On the upside, a great long trade may be indicated when the price closes above the upper boundary of a given Darvis box. I often use several charts side-by-side on my screen and it is not coincidental that the upper and lower boundaries of Darvis boxes coincide with existing support and resistance. However, the success of climbing or descending of the block structure gives me a unique viewpoint on both price action and support and resistance. In short, the Darvis box is both a e-mini chart object and an indicator; better yet, it sits directly in the price action section of my charts so I can make quick and immediate decisions on potential setups.
How do you trade the Darvis box?
I trade Darvis box very similar to support and resistance and ignore price action as it bounces around inside the box as a consolidation period. In a trending market, the market takes frequent pauses to consolidate before continuing back in the direction of the trend. Of course, this is not to say that every Darvis box breakout will be successful; like all systems, there are false breakouts and a distinct probability of failure in every set up. For that reason, I prefer to use the Darvis box only in trending e-mini markets. I should note that Darvis himself only intended his methodology to be used in the stock market and its adaptation into the e-mini market is a distinct extension of his methodology. Of course, any e-mini trade you may consider that does not entail a breakout or breakdown in the box is likely to fail. However, there can be little doubt that regardless of the time frame the methodology holds great merit.
So why not just use support and resistance and not the Darvis box?
In my trading the Darvis box gives me both support and resistance information along with market directionality. This means I can glance at a chart and ascertain a wealth of information that would take several minutes to understand on a traditional candlestick chart. As any futures trader knows, there are times when quick decisions are required and nothing in my trading system can match the Darvis box for quantifying those decisions. Further, I often change time frames when using the Darvis method to get a different look at price movement and consolidation patterns in a trend. Normally, these patterns can be very difficult to pick out of a bar chart or a candlestick chart, but the Darvis method handles these duties with ease.
In summary, I have spoken to some about how I use the Darvis box in a manner similar to support and resistance. We have discussed the market tendency to consolidate and bounce around inside an individual Darvis box and then finally break out in a trending market. These breakouts and breakdowns are potential setups for e-mini trades and should be evaluated as such. In short, Nicholas Darvis developed a wonderful system to see the market at a glance and make solid and sound trading decisions.
About the Author
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