DYO: Darvas Box stop levels

Q:  Is it possible for you to add the study Darvas Box?    Below is some info about how the system works.   The Darvas Box is considered by some to be a trading system wrapped up into a single indicator. The indicator uses a series of “states” to determine the upper and lower lines of a box by finding highs and lows.

Formula:
The calculation of a Darvas box is complex and is based on a series of  states, and a box is not formed until all states have been met.  Essentially, the Darvas Box requires the successful “finding” of a high and low over a set of three periods for each. Bar charts or candlestick charts are required because the high and low of a period is needed for the
calculation.  State 1 can start with any bar, and establishes the high (or BoxTop, which is simply a horizontal line crossing the high).

A bar moves to State 2 when the period’s high is lower than the State 1 period, otherwise it remains in State 1 and forms a new BoxTop.

A bar moves to State 3 when the period’s high is lower than the State 2 period, otherwise it returns to State 1 and forms a new BoxTop. In State 3 a BoxBottom is formed, which is simply a horizontal line crossing the low.

A bar moves to State 4 when the period’s low is higher than the State 3 period, otherwise it remains in State 3 and forms a new BoxBottom. (If the period’s high is higher than the BoxTop, form a new BoxTop and return to State 1.)

A bar moves to State 5 when the period’s low is higher than the State 4 period, otherwise it returns to State 3 and forms a new BoxBottom. (If the period’s high is higher than the BoxTop, form a new BoxTop and return to State 1.)  Only after State 5 is reached is a box formed on the chart.

Interpretation:
The prevailing interpretation of a Darvas Box is to locate breakouts above established highs an lows. Some traders consider it bullish when the price breaks above a BoxTop and bearish when it breaks below a BoxBottom.  Some traders also use the Box as a stop-loss by setting it as the BoxBottom in a long position or the BoxTop in a short position (or a percentage above/below the BoxBottom/BoxTop).

 A:  Thanks for the description.  Personally, I think any study should be bi-directional which means the box should be formed whether the sequence is highs followed by lows as you described, or lows followed by highs, which would be the compliment of starting in State 3 instead of State 1.

Anyway, here is a quick prototype of which I think the bi-directional box levels should be like.  In my opinion, the High box level is independent of the Low box level being formed.  Thus either can be formed in either order.  Being independent, the high box level is basically the high from the first of the three bars when its following two neighbors both have lower highs.  For the inverse, the Low box level is the low from the first of the three bars when its following neighbors both have higher lows.   This is the logic in this Design Your Own implementation.

So in the example chart, the box level highs are trailing behind in the falling market and show as Pink horizontal lines.  The box level lows are trailing behind in a rising market and are shown by the blue horizontal lines.   A quick example is the swing low for the day at 15:05.  This low is marked as a box level low because the following two bars have higher lows.  So the low of the 1st bar, the swing low, is marked as the box level low with a blue horizontal line.