Background
Nicolas Darvas was a professional dancer who turned $36,000 into $2.25 million in the stock market between 1957 and 1959 while touring the world, trading exclusively by telegram. His Darvas Box method — identifying stocks making new highs and buying when they break above a defined 'box' range — was one of the earliest systematic momentum strategies.
Core Methodology
The Darvas Box method defines a 'box' around a stock's recent trading range. When the stock makes a new high, the top of the box becomes the new upper boundary. When it establishes a support level, that becomes the lower boundary. A buy signal occurs when price breaks above the upper boundary on volume. A sell signal occurs when price breaks below the lower boundary.
Key Trading Rules
- Identify stocks making new 52-week highs with increasing volume
- Draw a 'box' around the consolidation range: upper boundary = recent high, lower boundary = recent pullback low
- Buy when price breaks above the upper box boundary on above-average volume
- Stop loss immediately below the lower box boundary
- As price advances, draw new boxes — trail the stop to the bottom of each new box
- Sell when price breaks below the most recent box's lower boundary
Key Concepts
Books & Resources
How I Made $2,000,000 in the Stock Market by Nicolas Darvas. Wall Street: The Other Las Vegas by Nicolas Darvas.