Nicolas Darvas and the Darvas Box Method

Posted on April 28, 2008
Filed Under Trading Software, Trading Tools |

Several years ago I became fascinated with Darvas Boxes after reading “How I Made $2,000,000 In The Stock Market” by Nicolas Darvas.

This book is considered by many as a trading classic and I read it at least twice myself. It is an easy read but is filled with some great insights into price action and is a “must read” book.

Who was Nicolas Darvas?

Darvas was a world famous ballroom dancer in the 1950s that learned to trade stocks while touring the world performing with his sister.

What makes his story so interesting is that he devised a trading system that looked for stocks making new highs and traded them by telegram using closing stock prices.

Since he made his trading decisions without the normal market noise of news and intraday price fluctuations he could remain totally objective which is something we all need to achieve in our own trading isn’t it?

Darvas Box Method

Put simply, Darvas constructed “boxes” (similar to a channel breakout) around a stock’s price chart looking for price breakouts based on formulas that can be found in his book and based his trades on them.

Since I like looking at new trading methods I immediately started searching for a software tool that would automate the construction of the Darvas Boxes on my charts.

For the most part everything I could find was either biographical in nature or was an explanation of how to manually construct Darvas Boxes.

The only real tool I could find was a Tradestation system written by a private party that was for sale. I bought it and played around with it for a bit but the problem with Tradestation is that it is extremely limited in its ability to scan a universe of stocks so I shelved my research into Darvas Boxes.

As I was writing this article I did a quick search and it looks like today not much has changed. Most of the information on Nicolas Darvas is about him, his books or an explanation of his system rules.

While there are a couple of sites that sell Darvas Box packages I wasn’t very impressed with them. One site’s product offerings were all “out of stock” which makes me wonder if they are even selling software anymore.

Nirvana Systems to the rescue…

Fortunately, the folks at Nirvana Systems built a Darvas Box plug-in for OmniTrader a few years ago that not only implements the original Darvas Box rules but also includes some enhanced Darvas Box systems.

Being an OmniTrader user I bought the plug-in and I must say that it is a very nice implementation of the Darvas Box method, easily the best available on the market today.

Will it make you money?

That’s the $2,000,000 question isn’t it? :) Just as a power drill can make a hole in a board or a hole in your hand a trading tool can either make you money or lose you money, it’s all in how you use it.

There is no “magic bullet” or “Holy Grail” in trading, just tools we can use to help us trade better if we use them correctly.

So, if you are interested in using Darvas Boxes in your trading I would recommend taking a look at the Nirvana Darvas Box Plug-in for OmniTrader.

Note: Once you get to the site click on the Store link to find out more about the Darvas Box plug-in.

Comments

4 Responses to “Nicolas Darvas and the Darvas Box Method”

  1. matthew on January 19th, 2009 6:14 pm

    Hi,i am forex trader and i am interested in darvas box method.I also read “How i made 2 millions in stock market” it is great book.I like breakout systems so i was looking for something special long time.Finally,i find the proper solution in Darvas box method.I can say that it works better on higher time frames,at least one hour.It is not holy grail like nothing in the sortiment of technical analysis tools because you need to have a good timing,exits and very important are the proper stop losses.But you can watch on charts and find pretty good settings,i think.I will appreciate for any backtest results !Thanks

  2. Mike on January 20th, 2009 5:37 pm

    Hi Matthew,

    Thanks for the comment. I have never traded Forex because of the volatility (my opinion).

    I have done some backtesting with OmniTrader with the Darvas Box Plugin and the results were OK. Like you said there is no Holy Grail and you need to have good trading rules in place.

    Thanks for reading,

    Mike

  3. Herve on March 1st, 2009 7:28 pm

    Hi Matthew, I found Ninja Trader has the Darvas box on their indicator list. I am on this page because I consider purchasing the book.

  4. Mike on March 2nd, 2009 2:38 pm

    Hi Herve,

    The book is good but will probably leave you with more questions as Darvas does not go into much detail on how to correctly construct Darvas boxes.

    Mike

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