Learning Centre
Understanding the VIGIL analysis framework
Market Phases
Markets move in repeating cycles. Identifying the current phase determines your strategy, position sizing, and risk tolerance. VIGIL classifies market conditions into four core phases.
Accumulation
Smart money quietly builds positions after a decline. Price forms a base, volume is low but rising on up days.
Characteristics
- Price moves sideways after a downtrend
- Volume slowly increases on green days
- Institutional buying visible in delivery data
- Breadth starts improving from lows
Historical Context
Historically, this phase shows sector leaders forming higher lows within a base. Smaller allocations are typical as the trend has not yet confirmed.
Markup / Uptrend
The trend is confirmed. Price trades above key EMAs, volume expands, and participation broadens across sectors.
Characteristics
- Price consistently above 9 & 21 EMA
- Higher highs and higher lows
- Volume expands on advances
- Broad-based market participation
Historical Context
Trend-following strategies historically perform well in this phase. Pullbacks to EMA support often present continuation setups. Leading sectors typically show the strongest participation.
Distribution
Smart money begins offloading. Price makes marginal new highs on declining volume. Breadth deteriorates.
Characteristics
- Price near highs but momentum fading
- Volume declining on rallies
- Bearish divergences on RSI/MACD
- Sector rotation into defensives
Historical Context
Risk management becomes critical in this phase. Historically, tighter stops and reduced position sizes have helped preserve capital during distribution.
Decline / Downtrend
Selling pressure dominates. Price breaks below key EMAs, volume spikes on down days, and fear rises.
Characteristics
- Price below both 9 & 21 EMA
- Lower highs and lower lows
- Volume spikes on sell-offs
- India VIX rising sharply
Historical Context
Historically, capital preservation is the priority in decline phases. Accumulation signs — such as improving breadth and volume patterns — typically precede a new cycle.
Condition Detection
VIGIL detects technical conditions through a multi-stage pipeline. Raw market data is processed through technical indicators, scored for setup quality, and surfaced as condition observations.
Condition Detection Pipeline
Market Data
Daily OHLCV data
Indicators
Technical indicators
Detection
Pattern recognition
Scoring
Multi-factor quality score
Condition
Bullish / Bearish / Neutral
EMA Crossover
When a faster EMA crosses above a slower EMA, it signals bullish momentum. A cross below signals bearish momentum. EMA crossovers are widely used as primary trend filters in technical analysis.
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of price changes on a 0–100 scale. Higher values suggest bullish strength, while lower values warn of weakness or potential exhaustion.
MACD (Moving Average Convergence Divergence)
A trend-following momentum indicator that tracks the relationship between two EMAs. A positive MACD with a rising histogram confirms upward momentum. Divergences between MACD and price can provide early reversal warnings.
Volume Analysis
Volume validates price moves. Breakouts accompanied by above-average volume are considered more reliable. Volume expansions act as confirmation signals, while low-volume rallies may lack conviction.
ATR (Average True Range)
A volatility indicator that measures the average range between high and low prices over a given period. ATR is commonly used for dynamic stop-loss placement — wider stops in volatile conditions, tighter stops in calm markets.
Setup Quality Scoring
Each detected condition receives a quality score from 0–100 based on a proprietary multi-factor model. The score evaluates how many independent signals align — considering trend structure, momentum, volume participation, volatility context, and the broader market environment. Higher scores indicate stronger alignment across multiple dimensions, while lower scores suggest isolated or weak setups.
Trend Structure
EMA alignment and price position
Momentum
Acceleration and strength of move
Volume
Participation and conviction
Volatility
Risk context and stability
Market Environment
Overall market and sector health
Risk Framework
Capital preservation is the foundation. VIGIL enforces strict risk management rules that adapt to market conditions. These rules are non-negotiable regardless of conviction level.
Position Sizing
- Limit exposure per single position to a small fraction of total capital
- Scale into positions gradually as the setup confirms
- Reduce position size as market risk level increases
- Avoid excessive concentration in a single sector
- Always maintain a cash reserve for opportunities and protection
Stop Loss Strategies
- Volatility-based stops that adjust to market conditions using ATR
- EMA-based exits when price breaks below key moving averages
- Hard percentage limits to cap maximum loss on any single position
- Trailing stops that lock in profits as the trade moves favorably
- Time-based exits if a position fails to move within a set period
Portfolio Allocation
- Core holdings in leading large-cap stocks from strong sectors
- Active allocation for momentum and breakout setups
- Satellite positions in high-conviction mid/small-cap opportunities
- Cash buffer to maintain liquidity at all times
- Rebalance allocation when the market phase shifts
Risk Levels Explained
Ideal conditions. Trend is strong, volatility is contained, and breadth is healthy. Historically favorable for trend-following approaches.
Some caution warranted. Minor divergences or rising volatility observed. Historically, tighter risk management has been prudent in this environment.
Significant headwinds. Multiple warning conditions active. Historically associated with increased drawdown risk and wider price swings.
Crisis conditions. Broad market breakdown, volatility spiking, breadth collapsing. Historically, these periods have seen the steepest capital erosion.
Glossary
Key terms and concepts used throughout the VIGIL platform. Reference this section whenever you encounter unfamiliar terminology.
EMA
Exponential Moving Average — a weighted moving average that gives more importance to recent prices, making it responsive to new data.
RSI
Relative Strength Index — momentum oscillator measuring the speed of price changes on a 0–100 scale.
MACD
Moving Average Convergence Divergence — trend-following momentum indicator showing the relationship between two EMAs.
ATR
Average True Range — volatility indicator measuring the average range between high and low prices over a period.
Market Breadth
The ratio of advancing to declining stocks. Strong breadth means broad participation; weak breadth signals a narrow rally.
Market Cap
Total market value of a company's outstanding shares. Large Cap (>₹20,000 Cr), Mid Cap (₹5,000–20,000 Cr), Small Cap (<₹5,000 Cr).
SIP
Systematic Investment Plan — investing a fixed amount at regular intervals to benefit from rupee cost averaging and compounding.
XIRR
Extended Internal Rate of Return — measures annualized return for investments with irregular cash flows, ideal for SIP returns.
NAV
Net Asset Value — the per-unit market value of a mutual fund or ETF, calculated as (Total Assets − Liabilities) / Units Outstanding.
FII/DII
Foreign Institutional Investors / Domestic Institutional Investors — their net buying or selling flows significantly impact market direction.
India VIX
Volatility Index — measures market's expectation of near-term volatility. Below 14 is calm, above 20 signals fear.
Delivery %
Percentage of traded volume that results in actual delivery. High delivery % on up days signals genuine buying interest.
Stop Loss
A pre-determined price level where a position is exited to limit losses. Dynamic stops based on volatility indicators like ATR adapt to changing market conditions.
Sector Rotation
The movement of institutional money from one sector to another based on economic cycles, creating leadership shifts in the market.