/biz/ - Business & Finance

Let's learn something today /biz/

>There are 4 stages of stock price action:

• Stage 1 - Neglect Phase - Consolidation
• Stage 2 - Advancing phase - Accumulation
• Stage 3 - Topping Phase - Distribution
• Stage 4 - Declining Phase - Capitulation

>The most profitable area to trade in is in a confirmed stage 2 breakout. Now in this stage, there are key areas on where to best pick your entry:

In a stage two advance, there are typically 3-6 bases on the way up. This is where your VCP patterns occur and gives the price breathing room and rest before advancing to the next base.

If there is any one commonality or Holy Grail that I follow and practice regularly, it is the concept of the volatility contraction pattern (VCP). This is a key distinction that I look for in almost every trade I make. A common characteristic of virtually all constructive price structures (those under accumulation) is a contraction of volatility accompanied by specific areas in the base structure where volume contracts significantly.

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