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VCP Notes

mvgowda

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11 views

VCP Notes

mvgowda

Uploaded by

muraliu91
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
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Links:

https://chartink.com/screener/setup-scanner-by-siddharth-trading-vcp --
>Updated : Tightness with Upthrust (stocks that are within range 3 %)

==============================================
Chapter 2.1 - Foundations & Cycles
==============================================

3 important Foundations works in 99% of stocks in 90 % times

1..Duration of the Move


2..Magnitude of the Move
3..BASES

Duration of the Move


=======================
1.. When the stock is coming out of BASES/Consolidation how many days it can move
in one direction with out giving a reversal that's called Duration of the Move
2.. Duration never works in BASES/Consolidation phase
3.. Duration of the MOVE : 2 to 7 days in any one side [OR] on an average we see
3 to 5 Green days followed by 2-3 red days
4.. Reversal /Correction will come after move 15%-20%-30 %

Magnitude of the Move


=======================
1.. Every stocks move differently
2.. We need to study the past behavior of the stock
3.. Magnitude to know on an avg how much stock rally expand in expansion STAGE-2
phase
3.. Every stock should move 15- 30 % and then stock move side ways /correction --
This is the magnitude of each stock
4.. Why Magnitude is important ?
Magnitude is Used to Measure and booking profit as we know stock move 15-30%
- Measure and book profit to minimize risk [OR] take out fund [OR} avoid fund stuck
to use other trade
5.. Magnitude to know on an avg how much it can expand in expansion phase STAGE-2
what we trade we get 15-20-30 % (in 2-5 days)
6.. Any stock can move come 3% and up to 30 % Always stock gives more chances
to enter
7.. if stock already move 5-8 % moved before breakout then not good to enter
breakout ? Yes

Note:
======
-- Behavior of stock move is 2 to 7 days green candles (AVG 3 days )
then it start reversal/pull back
[IMP]-- Don't consider pause days Behavior of stock move is 2 to 7 days
green candles (AVG 3 days ) then it start reversal/pull back
[IMP]-- IF the stock already formed 2 green candles before breakout --then
don't enter
-- IF the stock already moved 8-10 % then don't enter a breakout
because upside is already limited (15-20-30%)
-- First day of green candles enter is best ENRTRY
[IMP]-- Second day of green candles Enter is second best ENRTRY (not
recommended )
-- Third day of green candle don't Enter after third day we can see
reversal red candle ( May be Probability of hitting stop loss is high due to
reversal nature)
-- Duration V/S Magnitude - we have to give priority to Magnitude
-- if the stock give breakout and pause consider to enter based on
number of green days

LOGIC:
======

--Before breakout stock moved 5-10-15 % ignore breakout


--DAY1 : ENRTY first day breakout (if moved 3-5 % in same day)
--DAY2 : PAUSE (second Entry can be initiate)
--DAY3 : Not recommend to entry Because risk involved (reversal /pull back
--chances of hitting stop loss)

BASES AND MARKET CYCLE:


========================
1..For each an every consolidation and each pull back is also called as BASES
2..BASES/Consolidation is nothing but stock moves on side ways for long time OR
shorter time (its also called pause state)
3..Bases form during the contraction phase of VCP post volatility phase
4..Why we call it as BASE ? -- BASES/ consolidation is the place where supply
absorption will happen (sell out /profit booking more)
As a cash trader we need to look where the supply is
less to make more money. in bigger BASE supply is more
-- We being a swing trader always we need to trade SMALL BASES

-- There are 2 Types of bases


-- Big Base (stock which is side ways long time 6 month,1 year ,2 year )
-- Small Base (which is less than 30 days OR 1 month)
-- Big Base : stock which is in side ways for a longer period called BIG
BASE(example 6 month ,1-2-3 year)
-- Small Base : stock which is in side ways for a smaller period called SMALL
BASE (as per SID which is less than 1 month called small base)
-- Base duration: Base duration is very important( big base /small base ) .based
on the duration of base (small/big) accordingly we have to except the move
Hint: bigger the base big money /smaller base small money
-- SMALL BASES : we can expect move 15-20 %
[**PENDING] matured and Immatured Bases
-- Note: duration of the consolidation and duration of move is important

[IMP] LOGIC
============
-- Identify fresh stage-2 breakout stock
-- Note: roughly in a weekly time frame pattern Price should be above 10 EMA + 30
EMA So that we can say that stock in stage-2 /Explosation phase
-- We are finding stage -2 stock in that find small, small base
(rest/pause/consolidation phase ) then catch breakout (rally) phase
XX-- repeat 2 times --so we are stage-2 VCP trader
-- lets miss 1ST base 2 to 3 base is very important to capture move
-- SID do flag & pole trade
-- if 10 EMA is breeched means no demand (price above as long as we good to ride)
-- Price should be near by 10 EMA also we can consider price 2-3% away as tight
consolidation + 2-5 days consolidation is ok
-- 2 or 3 back to back double inside bar + dojis -never miss (10 ema tight range)
-- consolidation range of small BASES (3-8 days)
MARKET CYCLE
============================
STOCK MARKET LIFE CYCALE repeats STAGE-1 to STAGE-4 (all stocks move in this Cycle)
Note: our job is to find socks in STAGE-2

STAGE-1 [Base formation]: Accumulation


STAGE-2 [Advance]: Mark up ------> this STAGE-2 is important to trade
STAGE-3 [Topping out]: Distribution
STAGE-4 [Decline]: Markdown

-- How to identify /what is STAGE-2 stock signs ?


1..Open the chart and place to WEEKLY time frame
2..The price should be above the 10 Weekly moving average (10 WMA)
3..The price should be above the 30 Weekly moving average (30 WMA)
4..The 10 Weekly moving average (10 WMA)is above 30 Weekly moving average (30 WMA)
5..30 Weekly moving average (30 WMA) is up threding for 3-4 weeks

https://drive.google.com/drive/folders/1ddE2R_U8pi9qhflkF1APFoeDcpf2HAln
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