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?

grzltn 

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?

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.

trendisyourfriend 

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.

Hi Trend, thanks for responding & I hear you!

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.

grzltn 

Hi Trend, thanks for responding & I hear you! 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.

Have you tried using a Renko chart. It might interesting to compare as Renko bars never overlap. Just an idea to understand how it draws its boxes.

trendisyourfriend 

Have you tried using a Renko chart. It might interesting to compare as Renko bars never overlap. Just an idea to understand how it draws its boxes.

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.

Thanks for your thoughts.

Have fun!