Forex TradingTrading Cup And Handle

December 8, 202164

Prior to the decline that started the cup and handle pattern, the price had advanced about 30% over several months. The upward momentum carried through following the cup and handle. As mentioned, we may see triangles, or we may also see trading ranges or channels. Below is an example of a EUR/USD cup and handle daily chart, where the handle represents a channel or trading range angled down. The daily and weekly charts at both Investors.com and MarketSmith make heavy turnover easy to spot.

What happens after cup and handle pattern?

It occurs when there is a price wave down, followed by a stabilizing period, followed by a rally of approximately equal size to the prior decline. … A continuation pattern occurs during an uptrend; the price is rising, forms a cup and handle, and then continues rising.

The pattern consists of five key components, which then lead to a breakout higher. The handle has to be smaller than the cup and should only indicate a slight downward trend within the trading range – not one that goes lower than one-third of the way into the cup. Investors who see a similar pattern where the handle goes deeper might want to make efforts to avoid it. Once this happens, the the cup advances and forms a U, and the price drifts downward slightly forming the handle. This algorithm works extremely well when backtesting using forex and stock data provided by Finnhub stock api.

Picking A Target Or Profitable Exit

Set the stop loss just below the lowest point on the handle, but no lower than half the depth of the cup since the handle should remain above this level. Ideally, the stop loss should be within the upper third of the cup since strong handles will not drop below this point. Another method for identifying the profit target is to plot a Fibonacci extension. Plot the extension from the base of the cup to the start of the handle, then to the handle’s low. One hundred percent of the extension is considered a conservative price target for cup and handle pattern breakouts, while 162 percent is considered an aggressive price target.

What is the target of cup and handle pattern?

An estimated target is the height of the cup added to the handle breakout point; however, this may not always be met, as it requires a large price movement. A more conservative target is taking the height of the handle, multiplying it by two and adding it to the breakout price of the handle.

When looking at the cup, you want to make sure that it is rounded. If you are looking at a “V” shape cup, then the signal is most likely invalid. You should also be careful is the handle shoots down too rapidly. The Wave 5 Start indicator looks for the end of Wave 4 of a characteristic Elliott Wave pattern and marks that point on the price chart with a large colored dot.

Finding Cup And Handle

For the purposes of this article, I want to introduce you to the idea of buying the cup and handle breakout when the candlestick closes above the Ichimoku cloud. For those unfamiliar with the indicator, if the stock is able to close above the cloud convincingly, this is additional confirmation of the strength of the trend. If the stock is unable to close above the cloud, then the bears are in control and longs should step aside. Let’s walk through a few chart examples to illustrate the trading strategy. Some chartists like to set price targets following the cup and handle, based on duration of the pattern, degree of price movement, and strength of the subsequent continuation.

  • The stop-loss serves to control risk on the trade by selling the position if the price declines enough to invalidate the pattern.
  • The first bullish move took price to the resistance price of $63.
  • As with all chart patterns, trading volume and additional indicators should be used to confirm a breakout and continuation of the original bullish price movement.

Once a bottom is formed, prices will begin to rally (#3). At this point, the cup portion of the pattern has been created. The cup and handle pattern can be found within a variety of time frames, from hourly, weekly to monthly charts. However, it is more powerful on daily chart time frames.

Cup & Handle

To indentify peaks and troughs, we can use a smoothing function like moving average. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.

cup with handle formation

However, the total volume begins to decrease as the market is running out of sellers. The price trend is from sideways to slightly lower, and it carves the handle of the pattern. The cup and handle pattern appears after a big rally where the market needs to pause and catch its breath.

Recognizing Cup And Handle Patterns

Measure the distance between the bottom of the cup and the break of the handle . Place your stop loss by your risk management tolerance and trading plan. Another criterion for the truth of the cup and handle pattern is the position of the handle relative to the moving average with a period of 200. Cup and handle pattern formation was preceded by a strong upward trend. Now that we learned what a Cup and Handle pattern is, it’s time to look beyond the price action. Then understand the psychology behind this profitable trading pattern.

What is RSI and MACD?

RSI vs. MACD. The RSI and MACD are both trend-following momentum indicators that show the relationship between two moving averages of a security’s price. … The MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent price highs and lows.

To trade the cup and handle pattern, wait for technical levels of resistance to break. There are two areas where traders can buy the resistance break. When William O’Neil first identified the cup and handle pattern, the focus was on daily chart time frames. Now that charting software has made access to intraday cup and handle pattern charts easier, variations of this pattern have emerged such that it can be found within intraday chart time frames. Now that prices are near their old high, bullish traders stop buying and wait to see if a breakout takes place. Traders who bought near the old high are thankful and nervous at the same time.

Strategy #2

However, a true inverted handle happens when it fails to break down and finally meets the support level and attempts to break to a newer low. The entry point for a cup and handle pattern is to buy when the price moves above the handle formation. This is made simpler by using a drawing tool and waiting for the price to move up and out of the drawn handle pattern. A stop-loss can be placed below the low price point in the handle. The Big Tech share basket chart provides an example of this.

cup with handle formation

It creates a U-shape, or the “cup” in our “cup and handle.” The price then moves sideways or drifts downward within a channel—that forms the handle. Technical indicators work better when used in conjunction with other signals and patterns. In particular Day trading cup and handle patterns, various limitationshave come up over the years that have been discovered by traders and investors. First, this pattern can take some time to take full shape. Secondly, practitioners have found issues with the depth of the cup.

Here’s how you can find the best trading opportunities every single day using Scanz. Check out this step-by-step guide to learn how to find the best opportunities every single day. Customers who want to use their accounts for day trading must obtain the broker-dealer’s prior approval. Customers must also be aware of, and prepared to comply with, the margin rules applicable to day trading.

cup with handle formation

Traders sometimes use this pattern as a signal about when to buy the stock. As with all forms of technical analysis, this pattern essentially tracks investor behavior, not the underlying strength or weakness of a company’s business. The cup and handle indicator is a technical pattern found on crypto price charts. It indicates the correction of a previous uptrend and eventually signals its resumption.

If the second decrease resembles the first set of losses this is not a cup-and-handle and may represent a long-term decline in value. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations Finance appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research.

Author: Tammy Da Costa

64 comments

  • s

    December 8, 2021 at 10:11 pm

    Incredible story there. What happened after? Good luck!

    Reply

  • valium

    December 9, 2021 at 12:48 am

    Thanks for sharing such a pleasant idea, article is pleasant, thats why i have read it fully

    Here is my web page … valium

    Reply

  • instagram takipçi satın al

    December 9, 2021 at 7:08 am

    It’s amazing in favor of me to have a web site, which is
    valuable designed for my knowledge. thanks admin

    Reply

  • roblox

    December 9, 2021 at 7:53 am

    I’m really enjoying the design and layout of your site. It’s a very easy
    on the eyes which makes it much more enjoyable for me to come here and visit more often. Did you hire out a developer to create your theme?
    Excellent work!

    Reply

  • Avaliação do chevette

    December 9, 2021 at 9:54 am

    These are truly great ideas in concerning blogging. You have touched some fastidious points here.
    Any way keep up wrinting.

    Reply

  • discuss

    December 9, 2021 at 1:09 pm

    I enjoy what you guys tend to be up too. This kind of clever work and coverage!
    Keep up the very good works guys I’ve included you guys
    to our blogroll.

    Reply

  • wso shell

    December 9, 2021 at 2:55 pm

    If you would like to get a great deal from this paragraph then you have
    to apply these methods to your won weblog.

    Reply

  • y

    December 9, 2021 at 3:40 pm

    Howdy I am so happy I found your blog page, I really found you by
    accident, while I was browsing on Google for
    something else, Regardless I am here now and would just
    like to say thanks a lot for a fantastic post and a all round thrilling blog (I also love the theme/design), I
    don’t have time to look over it all at the moment but I have bookmarked it and also added
    in your RSS feeds, so when I have time I will be back to
    read much more, Please do keep up the awesome jo.

    Reply

  • 1

    December 9, 2021 at 4:42 pm

    When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I
    get three e-mails with the same comment. Is there any way you can remove me from that
    service? Appreciate it!

    Reply

  • e

    December 9, 2021 at 5:39 pm

    It’s an amazing article for all the web viewers; they will take advantage
    from it I am sure.

    Reply

  • canada estate agency

    December 9, 2021 at 7:52 pm

    Excellent site you’ve got here.. It’s hard to find excellent writing like yours nowadays.
    I seriously appreciate individuals like you! Take care!!

    Reply

  • cheap cloudlinux license

    December 9, 2021 at 7:55 pm

    My spouse and I absolutely love your blog and find many of
    your post’s to be what precisely I’m looking for. Does one
    offer guest writers to write content to suit your needs?

    I wouldn’t mind publishing a post or elaborating on some
    of the subjects you write with regards to here.

    Again, awesome web log!

    Reply

  • สล็อตxo

    December 9, 2021 at 8:20 pm

    I do consider all the concepts you’ve presented to your post.
    They’re really convincing and will certainly work.
    Still, the posts are very brief for novices. May just you please lengthen them a little
    from next time? Thanks for the post.

    Reply

  • Damion

    December 9, 2021 at 8:31 pm

    I enjoy what you guys tend to be up too. Such clever work and coverage!
    Keep up the fantastic works guys I’ve incorporated you guys to
    blogroll.

    Reply

  • n

    December 9, 2021 at 9:31 pm

    Do you have a spam problem on this site; I also am a blogger, and
    I was wondering your situation; many of us have developed some nice procedures
    and we are looking to trade techniques with others, be sure to shoot me an email if
    interested.

    Reply

  • discuss

    December 9, 2021 at 10:39 pm

    Yes! Finally someone writes about a.

    Reply

  • 2

    December 10, 2021 at 1:13 am

    After looking into a number of the blog articles on your web site, I truly like your technique of writing a blog.
    I added it to my bookmark website list and will be checking back soon. Please visit my website as well and let me know what you
    think.

    Reply

  • Hmm it seems like your site ate my first comment (it was super long) so I
    guess I’ll just sum it up what I wrote and say, I’m thoroughly enjoying your blog.
    I too am an aspiring blog writer but I’m still new to
    everything. Do you have any tips for novice blog writers?
    I’d genuinely appreciate it.

    Reply

  • real estate commercial property

    December 10, 2021 at 3:58 am

    I am sure this article has touched all the internet viewers, its really really pleasant
    article on building up new blog.

    Reply

  • boxlotto78

    December 10, 2021 at 8:13 am

    Have you ever thought about creating an e-book
    or guest authoring on other websites? I have a blog centered on the same topics you discuss and would really
    like to have you share some stories/information. I know my
    subscribers would value your work. If you’re even remotely interested,
    feel free to send me an e mail.

    Reply

  • Robert Zoost Realtor

    December 10, 2021 at 8:50 am

    This is very interesting, You’re a very skilled blogger.
    I have joined your feed and look forward to seeking
    more of your excellent post. Also, I’ve shared your
    website in my social networks!

    Reply

  • uppsatsen

    December 10, 2021 at 9:38 am

    Very good site you have here but I was curious about if you knew of any message boards that cover the same topics discussed here?
    I’d really love to be a part of group where I can get advice from other experienced individuals that
    share the same interest. If you have any suggestions, please
    let me know. Bless you!

    Reply

  • Auto insurance works in usa

    December 10, 2021 at 11:59 am

    I always spent my half an hour to read this blog’s articles everyday along with a mug of coffee.

    Reply

  • f

    December 10, 2021 at 1:47 pm

    I am extremely impressed along with your writing talents as neatly as with the format for your blog.
    Is that this a paid theme or did you modify it your self?
    Anyway keep up the excellent quality writing, it is uncommon to look a great
    blog like this one today..

    Reply

  • r

    December 10, 2021 at 2:07 pm

    It’s an remarkable post designed for all the internet people; they will get benefit from it I am sure.

    Reply

  • p

    December 10, 2021 at 2:48 pm

    It’s amazing to pay a visit this site and
    reading the views of all mates regarding this article, while I am also zealous of getting know-how.

    Reply

  • free web hosting

    December 10, 2021 at 3:05 pm

    hey there and thank you for your info – I
    have certainly picked up anything new from right here.
    I did however expertise several technical points using this web site,
    since I experienced to reload the site many times previous to I could get it to load correctly.
    I had been wondering if your web host is OK?
    Not that I am complaining, but slow loading instances times will sometimes affect your placement in google and could damage
    your high-quality score if advertising and marketing with Adwords.
    Well I am adding this RSS to my email and can look out
    for a lot more of your respective interesting content.
    Make sure you update this again soon.

    Reply

  • abestcccam

    December 10, 2021 at 3:06 pm

    Hi, I do believe this is a great blog. I stumbledupon it
    😉 I am going to return yet again since I saved as a favorite it.
    Money and freedom is the greatest way to change, may
    you be rich and continue to help others.

    Reply

  • Robert Ronning Kelowna

    December 10, 2021 at 3:18 pm

    Wow, marvelous blog layout! How long have you been blogging for?

    you made blogging look easy. The overall look of
    your website is wonderful, let alone the
    content!

    Reply

  • e

    December 10, 2021 at 3:26 pm

    Great article! We are linking to this great content on our website.

    Keep up the good writing.

    Reply

  • m

    December 10, 2021 at 4:36 pm

    Howdy! This is my first visit to your blog! We are a collection of volunteers and starting a
    new initiative in a community in the same niche. Your blog provided us beneficial information to work on. You have done a marvellous job!

    Reply

  • y

    December 10, 2021 at 4:52 pm

    First off I want to say terrific blog! I had a quick question that I’d like to ask if you don’t mind.

    I was curious to know how you center yourself
    and clear your thoughts prior to writing. I’ve had a hard time clearing my mind in getting
    my ideas out. I truly do enjoy writing however it
    just seems like the first 10 to 15 minutes are wasted just trying to figure out how
    to begin. Any suggestions or tips? Thank you!

    Reply

  • p

    December 10, 2021 at 6:04 pm

    Does your site have a contact page? I’m having problems locating it but, I’d like to shoot you an e-mail.
    I’ve got some creative ideas for your blog you might be interested in hearing.
    Either way, great website and I look forward to seeing it develop over time.

    Reply

  • d

    December 10, 2021 at 6:21 pm

    I blog often and I genuinely appreciate your information. The article has really peaked my interest.
    I’m going to bookmark your blog and keep checking for
    new information about once a week. I opted in for your RSS feed as
    well.

    Reply

  • b

    December 10, 2021 at 10:38 pm

    of course like your web site but you need to test the spelling on quite a few of your posts.
    Several of them are rife with spelling problems and I
    find it very troublesome to tell the truth nevertheless I will certainly come
    back again.

    Reply

  • r

    December 10, 2021 at 10:44 pm

    Hi! I know this is kinda off topic but I was wondering if
    you knew where I could find a captcha plugin for my comment form?
    I’m using the same blog platform as yours and I’m
    having difficulty finding one? Thanks a lot!

    Reply

  • g

    December 10, 2021 at 11:06 pm

    Can you tell us more about this? I’d like to find out some additional information.

    Reply

  • w

    December 11, 2021 at 12:35 am

    Wow, marvelous weblog format! How long have you been blogging for?
    you made blogging glance easy. The total look of your website is fantastic, as well as the
    content!

    Reply

  • cheap license

    December 11, 2021 at 4:29 am

    Saved as a favorite, I really like your website!

    Reply

  • נערות ליווי חזה ענק

    December 12, 2021 at 5:58 pm

    קמגרה תשדרג לכם את חיי המין ותאפשר לכם הנאה מרבית מהאקט. לטבע פלז’ר שלל פתרונות טבעיים נוספים שישדרגו לכם את חדר המיטות. קמגרה תשדרג לכם את חיי המין ותאפשר לכם הנאה מרבית מהאקט. לטבע פלז’ר שלל פתרונות טבעיים נוספים שישדרגו לכם את חדר המיטות. ליווי נערה

    Reply

  • נערות ליווי חזה ענק

    December 12, 2021 at 6:22 pm

    קמגרה תשדרג לכם את חיי המין ותאפשר לכם הנאה מרבית מהאקט. לטבע פלז’ר שלל פתרונות טבעיים נוספים שישדרגו לכם את חדר המיטות. קמגרה תשדרג לכם את חיי המין ותאפשר לכם הנאה מרבית מהאקט. לטבע פלז’ר שלל פתרונות טבעיים נוספים שישדרגו לכם את חדר המיטות. שרות ליווי

    Reply

  • send tokens from metamask

    December 13, 2021 at 7:01 am

    קמגרה למכירה בהרצליה אנשים באים אליה מהצפון, מהמרכז ומהדרום. לא לחינם נחשבת הרצליה לאחת מהערים המובילות בישראל בתחום הפנאי והבילויים. הרצליה היא עיר תוססת, עם מפגשים אנושיים רבים, metamask token factory example

    Reply

  • Jimkadia

    January 23, 2022 at 5:19 pm

    Check out this website that teaches you 1how to get free diamonds in cooking fever

    u3iauds11
    Cooking Fever is a lot more fun when you have as many gems as you want.If you enjoy mobile games like this you need to check out this website

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *