The pattern is a bullish continuation formation that marks a consolidation period, with the right-hand side of the pattern typically experiencing lower trading volume. The cup part of the pattern forms after a price rally and looks like a gradually rounded bottom of a bowl. As the cup is completed, a trading range develops on the right-hand side, which becomes the handle A subsequent breakout from the handle’s trading range signals a continuation of the previous price rally.

1. “It’s been effective,” Rivers said Monday night, “but it should be dominant, in my opinion.”
2. You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.
3. That’s a bit of an exaggeration, but I want every trader to understand how much a chart can tell you.
4. Here are some basic characteristics of the handle-related chart action to help you know if they’re proper or not.

The causes behind the pattern’s handle formation involves traders taking profits after the initial cup formation or a natural market reaction to the preceding bullish movement. At TradingStrategyCourse.com, we believe in empowering traders through free education. This community is a melting https://bigbostrade.com/ pot of knowledge and experience, offering you the unique opportunity to learn from the best in the business. YouTube channel for a deeper understanding of their methodology. ITC Trader is a trader renowned for his in-depth and analytical approach to trading in financial markets.

When traders know what the handle of the specific quote price is, it eliminated the need to say the entire full quote price when talking to other traders. Since most FX prices are quoted out up to five decimal places. Forex traders find it more convenient to just refer to the last two decimal places when discussing the bids and asks, and exclude the handle. Exchange-traded funds are similar to mutual funds, but they can be traded on an exchange like a stock.

Traders can use the cup and handle to identify potential bottoms and new trend shifts. However, they should be aware that not all signals are reliable, and other technical indicators should be used to confirm the setup’s validity. Also, there is a chance the pattern will appear in a downtrend before a trend reversal. So far we have only shown some anecdotal evidence of the cup and handle pattern. This site is all about quantified strategies and we only add a profitable trading strategy to our portfolio of trading strategies if it has strict buy and sell rules that is not left to discretionary judgment. The cup and handle pattern forms in an uptrend, especially a new uptrend.

Cup and Handle Pattern: Overview, How to Trade with Examples

We are pleased to present an excellent counter-trend strategy for working in any market and with any assets. If a Cup and Handle forms and is confirmed, the price should increase sharply in short- or medium-term. This level serves as a support area, and if the price falls below it, the pattern may become invalid. The cup and handle pattern books to learn from are How to Make Money in Stocks by William J. O’ Neil and Encyclopedia of Chart Patterns by Thomas N. Bulkowski. The bullish cup and handle pattern’s opposite is the bearish inverse cup and handle pattern, also known as the “inverse cup and handle” or the “reverse cup and handle pattern”. Additionally, by knowing how to trade this setup, traders may minimise their risks and protect their capital.

Markets

A cup and handle pattern trading strategy is the trailing 10EMA breakout strategy. Scan for cup and handles in markets with bullish price trends of 8%+. Enter a buy trade position when the price breaks out of the pattern on increased buying pressure (green volume bars).

Impact of Market Conditions on the Cup-and-Handle Pattern

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Every day we provide members with mentorship, webinars, chat, trading education, and community. It’s all so you can ask questions, get answers, and find your market groove. If you can see what other traders are seeing and determine how they are thinking, you can make smarter decisions and trade more effectively. Look for a roughly 30% downward move, an inverted U-shaped correction, and a bounce handle.

This happens when traders and investors stop selling shares and shift back into buying mode. Consider a scenario where a stock has recently reached a high after significant momentum but has since corrected, falling almost 50%. At this point, an investor may purchase the stock, anticipating that it will bounce back to previous levels. The stock then rebounds, testing the previous high resistance levels, after which it falls into a sideways trend. In the final leg of the pattern, the stock exceeds these resistance levels, soaring 50% above the previous high. Handles are relevant to all financial markets, but mean different things depending on the market.

The cup and handle pattern’s fourth trading step is to put a stop-loss order at the handle’s swing low point. Place a stop-limit order or a stop-market order at this level to manage risk. how to download metatrader 4 on mac Cup and handle pattern scanning involves traders using the Finviz.com cup and handle scanner, using a custom script to scan finance charts, or by using TradingView chart pattern scanners.

What Is the Cup and Handle Pattern?

The founder of the term, William O’Neil, identified four primary stages of this technical trading pattern. First, approximately one to three months before the “cup” pattern begins, a security will reach a new high in an uptrend. Second, the security will retrace, dropping no more than 50% of the previous high creating a rounding bottom. Third, the security will rebound to its previous high, but subsequently decline, forming the “handle” part of the formation.

Volume soared Sept. 30, followed by the breakout in twice average volume on Oct. 2 (4). Such action is called wedging, and it usually leads to failed breakouts. If the result for the handle’s midpoint falls below that of the base, the handle is too low. During normal market conditions, handle areas should drop no more than about 8% to 12%. This is the part of the quote that is equal to both the buy and sell price. A proper handle should drift downward, creating a shakeout of weak holders.