VCP Methodology — VN Adjusted

Last updated: 2026-05-13 Based on: Mark Minervini, Trade Like a Stock Market Wizard (2013), adjusted for HOSE / HNX market mechanics.

What is VCP?

Volatility Contraction Pattern (VCP) is a base-and-breakout setup where price action shows successive contractions — each pullback is shallower than the previous, and trading range narrows toward a tight pivot. The pattern signals institutional accumulation: large buyers are absorbing supply, reducing volatility, before a breakout.

The 5 Essential VCP Characteristics

1. Uptrend baseline

The stock must be in a confirmed uptrend before the base:

• Price > MA50 > MA200
• MA50 slope positive (rising over last 20 sessions)
• Trend duration: at least 30 sessions of uptrend

2. Multiple contractions

Inside the base, count distinct contractions (a contraction is a pullback followed by a recovery):

• Minimum: 2 contractions
• Typical: 3-4 contractions
• Maximum: 5-6 (more than this usually means base is too long)

3. Decreasing depth (the key signature)

Each contraction's depth (high to low) must be smaller than the previous one:

T1: 12% depth   (deepest)
T2: 7%  depth   (about half of T1)
T3: 4%  depth   (about half of T2)
T4: 2%  depth   (final tight contraction = pivot zone)

If a later contraction is deeper than an earlier one → not VCP (failed pattern).

4. Volume dry-up

As contractions tighten, volume must contract too:

• At the deepest part of each contraction, volume should be ≤ 70% of MA50 volume
• Final contraction: volume often drops to 50-60% of average (the "stillness")
• A volume spike at the pivot is the breakout signal

5. Pivot near recent high

The pivot point (top of the tightest contraction) should be:

• Within 5-10% of the 52-week high
• Above the previous high in the base (each contraction's recovery makes new local high)

VN-Specific Adjustments

Why VN differs from US

US (S&P 500 names)	VN (HOSE blue-chips)
No intraday price limit	±7% HOSE band per session
Tight 1-2% intraday range is "tight"	A "tight" 1-2% in VN means 1/3 of max band — that's exceptional
ATR commonly 1-3% daily	ATR commonly 1.5-3% daily on HOSE blue-chips, but 3-5% on small caps

Adjusted contraction depth thresholds

For HOSE blue-chips (typical):

• T1 max: 15% (some flexibility for early base contraction)
• T2 max: 10% (must be smaller than T1)
• T3 max: 6%
• T4 max: 3%

For HOSE mid-caps and HNX:

• Add ~1-2% to each threshold (more natural volatility)

Wide-and-loose detection

A "wide-and-loose" base is not a VCP — it's a sloppy range. Reject if:

• Total base range (overall high to low) > 25% of the lowest point
• OR if any contraction depth > 18% on HOSE blue-chip

Why this matters in VN: the ±7% band means an 18%+ contraction takes 3+ floor sessions. That's not consolidation — that's a serious correction.

Pivot quality

The pivot must:

• Be within 10% of 52-week high (vs Minervini's 25% guideline) — VN bases tend to form closer to highs because the ±7% band caps fast moves both ways
• Have at least 3 sessions of close prices within 2% of each other (the "tightness")
• Be above MA20 and MA50 at the pivot point

Volume reading

Volume dry-up is a hard requirement:

• Compute MA50 of volume over the 50 sessions preceding the base start
• At the deepest point of each contraction, volume should be ≤ 70% of that MA50
• At the pivot zone (last 5-10 sessions), volume should be ≤ 60% of MA50

If volume doesn't dry up → reject. Without volume contraction, the price tightening is meaningless.

Scoring

5 components, weighted 25 / 25 / 20 / 15 / 15 → total 100.

Uptrend (25 points)

Condition	Points
Price > MA50 > MA200, MA50 rising	25
Price > MA50 > MA200, MA50 flat	18
Price > MA50, MA50 < MA200	10
Else	0

Contractions (25 points)

Condition	Points
3-4 contractions, decreasing depth, all under thresholds	25
2 contractions, decreasing depth	18
3+ contractions but depth not strictly decreasing	10
< 2 contractions detected	0 (reject)

Volume dry-up (20 points)

Condition	Points
Final contraction volume ≤ 60% of MA50	20
Final contraction volume 60-70% of MA50	14
Final contraction volume 70-85% of MA50	8
Final contraction volume > 85% of MA50	0

Pivot quality (15 points)

Condition	Points
Within 5% of 52w high, tight (≤2% range over 3+ sessions)	15
Within 10% of 52w high, tight	11
Within 10% of 52w high, not tight	6
> 10% from 52w high	0

Wide-and-loose check (15 points)

Condition	Points
Base range < 15%, no contraction > 12%	15
Base range 15-25%, all contractions < 18%	9
Base range 25-35% or contraction > 18%	0 (cap grade at C)
Base range > 35%	reject entirely

Pivot and stop calculation

Once VCP is detected:

• Pivot: highest close in the final contraction zone (last 10 sessions), rounded to nearest tick
• Suggested stop: 5-7% below pivot OR low of the final contraction (whichever is higher)
  • Constraint: stop must be above the price floor of the day after entry (use compute_price_band from vn-market-mechanics)
• Target: R-multiple based (1R = pivot - stop)

When VCP fails

Even a perfect VCP can fail. Common failure modes:

• Failed breakout: price breaks pivot, then closes back below within 3-5 sessions. Exit on close back below pivot.
• Volume failure on breakout: breakout day's volume < 50% of MA50 → low conviction breakout. Tighter stop.
• News-driven gap below stop: at-market exit next morning, accept the loss.
• Market regime change: if VN-Index falls below MA50 while you hold a VCP entry, tighten stop or exit.

Suggested defaults

Parameter	Default	Notes
--min-base-length	25 sessions	Minimum days from base start to pivot
--max-base-length	90 sessions	Beyond this, base is too long
--min-contractions	2	Hard minimum
--max-contractions	5	Above this, often messy
--max-base-range-pct	25	Wide-and-loose threshold
--max-pivot-distance-from-52w-pct	10	Pivot proximity
--volume-dryup-threshold	0.7	Final contraction vol / MA50 vol