Volatility Contraction Pattern (Python)

The VCP strategy looks for a sequence of narrowing price ranges. As each range contracts, energy builds for a breakout. The system measures range size and waits for a break above the highest high or below the lowest low. Once contraction is observed, a breakout beyond the recent extremes triggers a trade in that direction. Price crossing the moving average is used to manage exits. This approach aims to capture explosive moves following a volatility squeeze.

• Entry Criteria: Range contraction then breakout of recent high/low.

• Long/Short: Both directions.

• Exit Criteria: Price crosses MA or stop.

• Stops: Yes.

• Default Values:

• MAPeriod = 20

• LookbackPeriod = 20

• CandleType = TimeSpan.FromMinutes(5) [*]Filters:

• Category: Breakout

• Direction: Both

• Indicators: Range, MA

• Stops: Yes

• Complexity: Intermediate

• Timeframe: Intraday

• Seasonality: No

• Neural Networks: No

• Divergence: No

• Risk Level: Medium