Thread by @swing_ka_sultan

As per promise, now I am sharing basic notes on the consolidation breakout & VCP pattern. This will help people in refining the watchlist created by the scanner shared by me previously.

Before starting I want to mention that the complete credit (1/n)

https://twitter.com/swing_ka_sultan/status/1139148783156023297?s=19

goes to @iManasArora for this setup. He beautifully designing the complete setup within few objective rules. I find the concept immensely useful, it helped a lot in my trading, and if you find the basic concept interesting, you should consider getting the webinar from Manas,
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as what I am sharing is just a drop from the ocean. Further trading success does not depend on trading systems, but on your practice, risk management and psychology. The webinar contains a very useful module on both- risk management & psychology, and you should consider

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making these perfect for your trading success.

For those of you who didn't checked the initial criterias for creating the watchlist, I am giving the link below. Pls go thru it, as this thread is a continuation of where we left off previously.
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https://twitter.com/swing_ka_sultan/status/1136502023770140672?s=19

Lets begin-

1- Apart from the seven initial criterias shared previously, you need to further refine your watch list for stocks which has free float less than 5000 Cr., most preferably 1000 Cr.

2- We will buy only breakouts, not pullbacks.

3- We will only buy companies

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which have shown immense strength.

4- The primary idea behind this trading setup is about buying a stock which had shown explosive move. Here explosive move means atleast around 50% move in last 4-5 weeks. The stock should surge atleast 50% in 4-5 weeks, then we need

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consolidation after sharp runup. We will get an entry when this consolidation breaks out.

5- The consolidation should not last more that 4 to 8 weeks. If the stock takes more than 8 weeks to break, it is an avoidable setup.

6- The explosive move should have huge volume

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but the consolidation should happen on low volume only. Volume should dry up once the stock take a pause & moves sideways after sharp surge.

7- Green days should be made on high volumes & red days should have low volume.

8- Primary idea is if a stock moved significantly (8/n)

in relatively less time, and going sideways in small box & lack of volume, it is an extremely healthy sign.

9- For further refining, we will look for VCP- volatility contraction pattern in the consolidation. The prime concept behind VCP is volatility tends to expand after
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contraction. We find similar concept in Wyckoff's market structure, where range bound periods of accumulation & distribution is followed by mark up & mark down phases where volatility expands significantly.

If we minutely look into this concept, we will find that this

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whole setup shares several similar characteristics of Wyckoff's re-accumulation phase.

10-Good VCP ideally has 3 contractions.

11- In VCP, volatility drop should be ideally 50% down with every contraction.

12- Time taken to complete the entire contraction should also
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drop by around 50% in subsequent contractions.

13- If VCP has 2 contractions only, the second contraction should have more than 70% contraction.

14-You need to check how many days it will take for stock to move up after breakout. 5 to 10 days is expected. More than

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10 days will raise concerns over the success probability.

15-Stock is getting shallow pullback & moving up within 5-10 days of consolidation is Tennis ball action.

16- Check the volume on Green days vs Red Days. These will help you know when you should remain into the
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trade & when you should exit.

17- Stoploss should always be 2x 20 Period ATR from enter price. You should trail this stoploss by calculating 2x 20 Period ATR from every new high made after entering the trade.

18- Ideally our initial risk should be 0.5% of our entire
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capital i.e. in case our trade goes against us, we won't lose more that half percent of our portfolio.

19- We will average up in subsequent consolidations after our initial entry. Every new entry should be considered as fresh entry & you should do all the necessary risk
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management activity before entering the trade.

20- On target front, there is no predefined target of how much a stock can run. If you keep small targets, you will miss out big moves.

21- As you have a trailing stoploss in form of 2x 20 Period ATR calculated from swing
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high, if stock hits this trailing stoploss you should exit.

22- In case you see a "change of character" in the stock- this is actually a very beautiful wyckoff term not used by Manas but it perfectly goes here- you should decide exiting from the trade. This change of
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character should include remaining too long in consolidation, getting considerable volume on pullbacks etc.

23-Otherwise if the angle of trend turns steep, runs far away from 10 MA & exhaustion gap appears, lock in your profits.

These are the 23 points I hoped that can

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help you in understanding the concept & you also be able to use the scanner. For further learning you should visit Manas's timeline, he shares all his trades with charts, and rational. He often help with genuine queries too.

I want to thank you all with hopes that it

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might help with basic questions. In few days I am thinking about sharing one of my own work, which can give an initial idea about when U should take a trade, when U should avoid & when prefer a counter trend trade.

Till then thanks a lot & lots of Good Luck!

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I feel people are having some issues in reading this really long thread, specially as @threadreaderapp not working, hence I compiled all tweets in a txt file. You can read it as a note, you can also save it for using later. Enjoy!
#from_swing_ka_sultan
drive.google.com/file/d/10EJVSc…