Darvas Boxes NMC Indicator
MT5 Market Levels TradingFree DownloadThe Darvas Boxes NMC Indicator for MT5 draws squares and rectangles on activity chart. These shapes have special meaning as their right edges act as potential trade entry points. What’s more, the formula behind this tool allowed its creator to amass a considerable fortune.
A little bit of historical background
Nicolas Darvas developed his unique approach of technical analysis and applied it to stock trading. He became famous once he managed to make staggering $2.000.000. According to Investopedia, it was just from starting balance of $10.000 – which gives 200x return rate. This achievement earned him place among most successfull traders of all time. What’s more, this successful formula is used in this indicator as well.
Understanding these Darvas boxes
First of all, let’s get familiar with the example chart below to be more familiar with its visuals.
As you can see (and the name implies directly), the core element are the boxes corresponding to a price range. Every new one is placed after new highs and lows. Observing the price inside the defined area is our starting point.
Trade entries
While the price is within the box, it’s considered to be in consolidation phase and there is no action required. The upper horizontal side acts as support level and the lower one as resistance. These zones are sensitive and traders should watch out for price action as potential break may occur.
The fun part actually starts when the breakout happens and such setup is marked with dedicated upward or downward arrow. This is the trigger for a short or long position. The stop loss can be placed in a few pips distance from the boundries of the box.
When to take profit?
The indicator doesn’t provide take profit target directly. You can approach it in several ways, e.g. specific risk-to-reward ratio (like 1:2). But we have better suggestion. It’s good to use it in conjuction with fractal support and resistance levels as this combination provides better entry points and increased success rate.
Example trade
Let’s have a look at this USD/CHF H1 real trade example. That top brown horizontal line is weekly resistance and significant market area. As you can see, it almost perfectly rejected that price level. Following the sell signal, the price fell a lot to the hourly resistance defined by a green dotted line.
Spotting important areas like that and taking advantage of similar setups for entries is a smart and profitable way to go.
Conclusion
We rate the Darvas Boxes NMC as a very good breakout or even reversal indicator for MetaTrader 5 platform. Of course, not all signals should be taken as they are, but when used with other technical gauges, they can together create a great forex trading strategy.
