VCP-Minervini v2

The VCP-Minervini v2 indicator provides a comprehensive framework for detecting and managing the Volatility Contraction Pattern (VCP) to identify high-probability breakout setups in stocks and indices.

Usage

The tool is designed for swing and position traders to find clean breakout opportunities, ideally on daily or weekly charts. The workflow typically involves:

• Watchlist Building: Monitor charts for yellow (or blue circle) markers which highlight potential setups where volatility is contracting.
• Entry Confirmation: A breakout is confirmed when the price closes above the red Pivot Level line while remaining above the designated EMA. A green marker indicates an active breakout state.
• Trade Management: The green marker remains active as long as momentum persists. If the green marker disappears, it signals that momentum is fading (volume and range contraction), suggesting it may be time to secure profits or tighten stops.
• Trend Filtering: The script uses an EMA filter to ensure setups are only valid when the price is trading above the prevailing trend.

Details

The indicator is based on the technical analysis principles developed by Mark Minervini. It measures volatility contraction using the Average True Range (ATR) relative to its historical lows over a specific period.

• VCP Detection: Identifies periods where price action tightens, indicating a "quiet" period before a potential explosive move.
• Automatic Pivot: Once the contraction criteria are met, the script automatically identifies a resistance level (Pivot) based on recent price highs.
• Exit Logic: Unlike many breakout tools, this script includes internal logic to detect fading momentum. It compares current volume and True Range against their respective moving averages; if both drop below average, the breakout state is invalidated.

Settings

Main Parameters

• VCP-Periode: The lookback period used to determine the lowest volatility point for contraction detection.
• Pivot-Widerstand (Lookback): The number of bars used to calculate the local high that forms the resistance pivot level.
• Volatilitaets-Toleranz: A multiplier that defines how strictly the ATR must contract to trigger a VCP setup.
• Volumenvergleich (Exit): The period used to calculate average volume for the exit logic.
• TrueRange-Vergleich (Exit): The period used to calculate the average True Range for the exit logic.
• Max Tage nach VCP erlaubt: The number of bars the VCP setup remains "valid" while waiting for a price breakout.
• EMA-Filterperiode: The length of the Exponential Moving Average used to filter for the prevailing uptrend.

FAQ

How do I interpret the markers on the chart?

The small blue/yellow circles represent potential VCP setups (volatility contraction). The green circles represent an active breakout state where the price has crossed the pivot level and maintains momentum.

On which timeframes does this work best?

The strategy is traditionally optimized for daily and weekly timeframes on liquid stocks to capture medium-term swing moves.

How can I access VCP-Minervini v2?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.