Nicolas Darvas became famous for publishing his success story in the bestselling book, How I Made 2 Million in the Stock Market.
The excellent text describes Darvas’ implementation of a range breakout system, which has become known in popular trading circles as the ‘Darvas Box’.Thousands of traders rely on the breakout signals provided by this simple yet powerful approach to signal their confirmed entries.
The Darvas Box is used to normalize a trend. A long signal would be indicated when the price of the stock exceeds the top of the box. A short signal would be indicated when the price of the stock falls below the bottom of the box. Nicolas Darvas only used the indicator for long trades, therefore his method of calculating the box was a high first method. In other words, he would calculate the high, or the top of the box first and then determine the bottom of the box.
