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Can anyone explain the NT8 logic for drawing the Darvas box indicator? There are thousands of posts/Youtubes on trading strategies on how to use the Darvas box - but I am yet to find one that actually explains the logic in drawing the NT8 indicator. From the NT8 site:
NT8: A trading strategy that was developed in 1956 by former ballroom dancer Nicolas Darvas. Darvas' trading technique involved buying into stocks that were trading at new 52-week highs with correspondingly high volumes. And references Investopedia.
Investopedia presents the logic with very flawed examples and boxes drawn retrospectively ...?
See the NT8 indicator below - it does not make sense to me, unless this is flawed?
Thoughts?
Can you help answer these questions from other members on NexusFi?
This is a price action not a mathematical indicator . It repaints. After a breakout it will adjust its lines when price retraces as shown in your example. The idea is to mark areas of congestion when bars overlap to form a box. Just open a playback connection and replay a sequence where prices breaks a line. You'll see what i mean.
Especially when Darvas first used his stuff, it was all pen and paper in the 1950's somewhere. And then drawing the box retrospectively kind of makes sense.
However, not a mathematical indicator, NT have implemented some mathematical rules. What confuses me is that new highs and lows repaint, but then a bit further on in time these become Darvas box breakouts (instead of repainting). I just don't get the logic where is repaints vs where is becomes a breakout. And this can be very dynamic on 5m charts.
I use 3 renko charts (incremental charts) for the actual trade signals and management. I use 4 separate normal time charts for 1m, 5m, 15 and 60 for filters (mostly dynamic fans to see how price travels with time).
I now think Darvas are just a bit too basic for my needs but thought I may have had an application for them as a filter but there seem to be better options available more suited to shorter timeframes.