Volatility Contraction Pattern (VCP)
The Volatility Contraction Pattern is Mark Minervini's signature setup: a stock in an uptrend builds a base through a series of progressively smaller pullbacks - each contraction tighter th…
The Volatility Contraction Pattern is Mark Minervini's signature setup: a stock in an uptrend builds a base through a series of progressively smaller pullbacks - each contraction tighter than the last, on drying-up volume - until supply is exhausted, then breaks out from the tightened base. This strategy buys that breakout above the base's pivot high and holds until the trend breaks below the 50-day moving average.
How it trades
| Ingredient | Meaning |
|---|---|
| VCP() | 1 when the recent base shows successive volatility contraction on lighter volume, else 0 |
| PIVOTHIGH() | The pivot (base) high - the resistance a breakout must clear |
| SMA(50) | The 50-day moving average - the trend line the exit rides |
Buy (contraction resolves into a breakout):
VCP() AND Close > PIVOTHIGH()
Sell (trend breaks):
Close < SMA(50)
When it works best
A high-quality, high-conviction setup with excellent risk-to-reward: the entry sits just above a tightly-defined pivot, so a stop below the base is small relative to the potential move. Its trade-off is exactly its strength - the pattern detection is complex and genuine VCPs are relatively rare, so it trades infrequently and depends on the contraction being clean; loose or choppy bases produce weaker signals.
Backtest this strategy yourself
Build these rules on the Free plan, adjust them, and see how they would have traded.