• David Yocum

Volatility Contraction Pattern (VCP) Setup

Updated: Jun 19

The Volatility Contract Pattern has become famous from US National Investing Champion, Mark Minervini. What is a VCP setup?

  • Strong Underlying

  • Strong Volume

  • Price Tightening

  • Low Volume Pullback & Chop

  • Strong Breakout on Strong Volume

 

$GRWG Example

In August of 2020, GrowGeneration Corp. had a huge spike in price and volume. The stock ended up retracing to its EMAs and consolidated for a couple months before breaking out on large volume in November. This ultimately led to a huge run in stock price as $GRWG continued to make new highs.

 

VCP's exist across the whole market at any given point whether that be a long or short position. Scanning for volume and trending stocks is how I choose to find these names. With proper risk management in place, this is one of the best setups to trade in the market. To learn more about the VCP pattern, I highly recommend checking out Mark Minervini and his books. I personally own "Think and Trade Like a Champion" which is my favorite trading book of all time.

 

Want to read what all of the US Investing Champions recommend? This book very well could be the best $30 you will ever invest into yourself.





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