The Darvas Boxes indicator, named after its developer Nicolas Darvas, is a powerful tool for traders, known for its effectiveness in momentum and trend trading. Darvas, a renowned stock trader, famously turned $25,000 into $2,000,000 using this method. Unlike many trend indicators, the Darvas Boxes indicator does not predict or speculate on price movements but rather reacts to price action.
How to Use the Darvas Boxes nmc Indicator
The indicator draws a box around the price range, typically capturing new highs and lows. A box is formed by connecting the highest highs with an upper line and the lowest lows with a lower line. If the price touches a previous high but stays below the maximum price, it remains within the Darvas box. The indicator also provides arrows to signal potential long or short positions.Key Features:
- Momentum Breakouts and Reversals: The Darvas Boxes indicator is excellent for identifying momentum breakouts and potential price reversals.
- Trend Identification: It helps in spotting short-term trends, showing consistent rising lines in a strong uptrend.
- Versatility: Suitable for various time frames, making it ideal for both day traders and swing traders. It can be used for trading currency pairs as well.
Trading Signals:
- Buy Signal: Look for a tight-ranging market. Enter a buy position when a bullish candle breaks above the box’s resistance line. Place the stop loss just below the Darvas box or a few pips below the entry candle.
- Sell Signal: The indicator shows a sell signal when a Darvas box forms during price consolidation. Place the stop loss just above the box or above the entry candle. Exit when the indicator signals a buy, or when the trade reaches the take-profit level.