How to find Darvas Stocks using TradingView's Stock Screener 2.0

9 באוק׳ 2023

🔷 Introduction

Nicolas Darvas, a dancer by profession and a self-taught trader, managed to turn a mere $36,000 into a whopping $2 million within an 18-month timeframe during the late 1950s. His approach to trading, now famously known as the Darvas Box Theory, primarily focused on trading stocks that were making new highs. But why was Darvas so fixated on these particular stocks?

Darvas believed that stocks hitting new highs were driven by fundamental factors that had caught the attention of many investors, thereby driving up demand. He was particularly interested in stocks that were not only hitting new highs but were also accompanied by significantly higher-than-average trading volumes, indicating strong investor interest and buying pressure. These stocks, often referred to as "Darvas Stocks," typically exhibit a strong upward momentum and are characterized by their ability to remain resilient, even in a sideways or bearish market.

In this guide, we will explore how to utilize TradingView's Stock Screener 2.0 to identify potential Darvas Stocks by filtering for stocks that are near their all-time or 52-week highs and are trading on above-average volumes.

🔷 Step 1: Open Stock Screener 2.0

First, navigate to the Stock Screener 2.0 by clicking here: tradingview.com/stock-screener/

Your screener should look like this:



Note: TradingView also has a Stock Screener 1.0. (available at tradingview.com/screener/). Do not use version 1.0, as it does not have the necessary filters we are going to use in our quest for Darvas Stocks.

🔷 Step 2: Set Up the Price Filter

To identify stocks that are near their all-time or 52-week highs, we'll set up a custom Price filter.

To create a custom Price filter, click on the Price filter button and select "Custom". If you can't see the Price button in the top toolbar, click on the + icon and search for Price.

In the Price filter creation dialog, in the first drop-down, select "Below %".

In the second drop-down, select a percentage (e.g. 0-5%). This is how much the price will have to be below the all-time/52-week high in order to qualify as a Darvas Stock.

In the third drop-down, select "New high".

And finally, in the fourth drop-down, select either "52W" or "All Time", depending on the timeframe you wish to use.

When fully configured, your custom price filter should look like this:



Once you click on the button with the tick, your filter should be applied.

Next, let's set up the Volume filter to only show those stocks that trade above average volume.

🔷 Step 3: Configure the Volume Filter

Darvas placed a significant emphasis on volume as it indicated the strength behind the price movement.

To create a custom Volume filter, click on the + icon and search for Volume.

You have multiple options here. You can either compare the daily/weekly volume against weekly/monthly volume or compare volume averages.

If you would like to compare the stock's Volume, select "Volume" from the results. If, instead, you would like to compare volume averages, choose "Average Volume".

In the example below, we will show you how to set up the volume filter so that it only shows those stocks which have their 10-day average volume trading 50% or more above their 30-day average volume.

To compare volume averages, create a custom "Average Volume" filter.

In the Average Volume filter creation dialog, in the first drop-down, select 10D.

In the second drop-down, select "Above %"

In the third drop-down, select "50% or more".

In the fourth drop-down, select "Average Volume".

And finally, in the fifth drop-down, select 30D.

When fully configured, your custom average volume filter should look like this:



Once you click on the button with the tick, your filter should be applied.

🔷 Step 4: Additional Filters (Optional)

You may also want to apply additional filters based on your trading preferences, such as:

Market Capitalization: Filter stocks based on their market cap to focus on companies of a particular size.

Sector/Industry: If you want to focus on specific sectors or industries, apply the relevant filters.

🔷 Step 5: Analyze the Results

Once you have your list of potential Darvas Stocks:

Examine the Charts: Look for stocks that are forming a Darvas Box, indicating a consolidation period followed by a breakout.

Fundamental Analysis: Although Darvas primarily used technical analysis, ensuring the company has solid fundamentals can provide additional confirmation.

🔷 Step 6: Continuous Monitoring

Maintaining a watchful eye on the stocks that align with your criteria can offer valuable insights into market behaviour and the practical application of the Darvas Box Theory. It's essential to observe how these stocks perform, particularly how they behave around their respective boxes, and to use this as a learning opportunity to understand the nuances and potential challenges of implementing this strategy in real-time trading scenarios.

🔷 Conclusion

Utilizing TradingView's Stock Screener 2.0 to identify potential Darvas Stocks provides a structured and efficient method to explore and understand the principles that Nicolas Darvas applied to his own trading journey. Observing stocks that are making new highs on above-average volumes allows you to delve deeper into the Darvas Box Theory and appreciate its practical applications and limitations. Remember, the objective is to learn and understand the strategy, not to provide a foolproof trading system. Always approach trading with caution, and consider utilizing a demo account to practice without risking actual capital.