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Breakout
Which contractions separate a VCP from an ordinary breakout?
Volatility contraction breakout · Volatility contraction pattern
What it bets
In an advance, pullbacks that get shallower and narrower each time make the breakout at the end of the contraction look more like supply drying up.
How the rule is written
Mark Minervini's version on stocks: after an advance, several pullbacks appear, and both the depth and the range get smaller in turn, then price breaks the pivot of the last consolidation. It comes from stocks, and the story often includes fundamentals. Carried onto a perpetual, what can remain is the volatility contraction and the pivot breakout. Earnings reports and share-count stories do not come with it.
When it fails
One sideways patch is not a VCP. Without contractions that are smaller each time, it is an ordinary consolidation.
Do not confuse it with
NR7 only asks whether one bar is the narrowest of the recent window. A flag only asks for a tight pause after a sharp run. A VCP requires the contraction to tighten in steps.