Hi and Welcomne to this journal! Here I will share my way of trading the Darvas method on stocks by posting my actual trades and results. About the method: All my trades are done on the daily time frame and the method is simple as following these 3 steps: Find Stocks that have crossed the EMA 200 with volume greater than 100% the 50d avg, more = better. Stocks found in 1 should be kept in a Watch List and be tracked while they form their 1st darvas box above the EMA 200 or with the EMA200 inside the box. Once that the first Darvas Box as described in 2 is broken to the upside we enter long and set an initial Stop Loss at 10% of the cost. Once that the trade is in place, we ride the trend by moving the Stop Loss to the low of a new box as soon as it's broken to the upside. My money management Rule is to allocate 10% to 20% of my balance to every trade, so with 10% risk on the first entry, my initial risk is between 1% and 2% of my balance. Here is a chart that says it all. Here we see the first entry on the left in March 22 followed by a failure in June and that's fine as failures are part of the game. Later, the EMA200 was again crossed in July with good volume and the first Box completed in September with the entry being around 15 September. Stops are moved on next major consolidations, keeping the smaller ones aside. Finally the trade went on for more than a year and was stopped out Nov 23 with a profit of 100%+ which gives a win ratio of 10 to 1 ! Of course the example above works best during a bullish market phase so we must be aware of which market phase we are in. This is how it should be done and what I will try doing.
Trading SMTC, my first trade using this approach... Entered a long position in SMTC on April 29 at 36.32 Checklist: Strong volume on EMA cross => OK Broke up its first (incomplete) box to the upside => OK Stop Loss set at 10% of trade cost => Moderate risk as it's in the middle of the consolidation box. Status: HOLD. Waiting SL to be hit or the formation of a new box to move SL.
Trading ST Entered a long position in ST in May 1 at 38.24 Checklist: Strong volume on EMA cross => OK Broke up a box at the same time it crossed the EMA200 => Moderate risk but OK Stop Loss set inside the box as it's larger than 10% => Moderate risk, OK Status: HOLD. Waiting SL to be hit or the formation of a new box to move SL.
Trading BAND Entered a long position in BAND May 1 at 18.99 Checklist: Strong volume on EMA cross => OK Broke up second (complete) box to the upside after some consolidation => OK Stop Loss set inside the box but near limits => OK Status: HOLD. Waiting SL to be hit or the formation of a new box to move SL.
Trading VIRT Entered a long position in VIRT on April 30 at 21.84 Checklist: Strong volume on EMA cross => OK Broke up second box to the upside => OK Stop Loss well outside the box => OK On this one I was fortunate to miss the first valid entry that failed but was present to enter the second time. Status: HOLD. Waiting SL to be hit or the formation of a new box to move SL.
Trading RNG Entered a long position in RNG yesterday May 09 at 35.30 Checklist: Strong volume on EMA cross => OK Broke up first box above EMA200 to the upside => Not yet, Risky (done by mistake) Stop Loss well outside the box => NO, Stop Loss set at 10% Well, I didn't follow the rule of waiting for the box formation on this one so I will consider closing it quickly should things go wrong. Still if it manages to print a new 52W high and consolidate, the trade could become valid. Status: HOLD. Waiting SL to be hit or the formation of a new box to move SL.
Trading CADL and EBS Putting these 2 together as they don't follow my buy/sell rules. They are 2 long term plays where I just decided to put some risk capital on. I liked their recent activity and their potential for rising given the industry they are into so I wanted to give them a try. Both are already profitable but it's too early to say they will end well, also, CADL has more of my attention (and money) than EBS. CADL EBS
Portfolio update So far all my entries are profitable in paper but as I still couldn't move any stop loss they still are potential losers and my stop losses are in place except for CADL and EBS. STOCK.. | Entry date | Entry price | Stop P/L | Current P/L SMTC... | 29-APR-24. | 36.62...... | - 10%... | + 7.9% VIRT... | 01-MAY-24. | 21.84...... | - 10%... | + 9.7% ST..... | 01-MAY-24. | 38.24...... | - 10%... | + 11.4% BAND... | 01-MAY-24. | 18.99...... | - 10%... | + 14.8% RNG.... | 09-MAY-24. | 35.30...... | - 10%... | + 5.5% CADL... | 04-APR-24. | 7.05....... | ........ | + 49.2% EBS.... | 07-MAY-24. | 4.38....... | ........ | + 16 %
Portfolio Update - End of May 2024 I have been finalizing my entry criteria in the past weeks. I have now more clear rules in order to justify an entry. Some of the existing entries did not match these updated rules so I decided to remove them for small profits or losses and keep some others that where still showing relative good strength. The result of those adjustments being a small loss, I decided to count them as 1 loss for the current trading window. As for the technical, I simple screen for stocks making fresh new 52 week highs, Like Darvas did, and enter after the break of the first consolidation box after that high, clear and simple. On paper trading I also saw that several times, stocks need more space to breath and that my initial 10% risk was sometimes a bit short, so I changed my risk tolerance to 15% but lowered my exposure on any stock to 1/20 of my capital, except some exceptions, which means that I only risk no more of 15%/20 which is 0,75% of my capital on any stock. That brings the total positions to 20 at the beginning my goal being to have 52 in the future. Given the new increased risk above I had also to increase my profit target to 100% instead of 50% to keep a good Risk/Reward of 1/6 meaning that I only need 13% of winning trades to be break even and that anything above 30% brings already good profits, my goal being to reach 50%. I have also decided to put an age limit of 52 weeks on all my trades meaning that after 52 weeks I will close the trade whatever the profit is, that's also why I have a goal of having 52 stocks in my portfolio, that would allow me to collect and compound profits every week. That's all I have put in place and started doing, It seems to me like the perfect system, I just need now to prove to myself that I can do it and most important, manage it in any market circumstance. Portfolio Status ..# | STOCK.. | Age (weeks) | Entry price | Current P/L ..1 | CADL... | 8.......... | 7.05....... | + 26% ..2 | SMTC... | 5.......... | 36.62...... | + 6% ..3 | BAND... | 4.......... | 18.99...... | + 6% ..4 | VIRT... | 4.......... | 21.84...... | + 1% ..5 | ST..... | 4.......... | 38.24...... | + 8% ..6 | EBS.... | 4.......... | 4.38....... | + 29% ..7 | HG..... | 3.......... | 16.57...... | + 4% ..8 | MATV... | 2.......... | 18.97...... | - 6% ..9 | MAG.... | 2.......... | 13.85...... | - 3% .10 | LYFT... | 1.......... | 16.59...... | - 6% .11 | ZIM.... | 1.......... | 20.83...... | + 8% .12 | FUTU... | 1.......... | 76.77...... | - 2% .13 | BROS... | 1.......... | 35.34...... | + 0% Trading Window (52 Week)..# | Losers | Winners | Portfolio Value (US$ | April 2024 - May 2024...... | .....1 | ......0 | .............107,000 | .
