The pattern is formed when the price of an asset forms a cup shape, followed by a handle smaller than the cup. In this order, a stop-loss is used to prevent traders from staying in a trade if there is no breakout from the cup-and-handle pattern. The order triggers a sale when the asset price falls far enough to nullify the pattern. Commentary and opinions expressed are those of the author/speaker and not necessarily those of
SpeedTrader.

• To determine the cup and handle, follow price movements on a chart and look for the “u” shape and the downward handle.
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• The handle should also show a downward slope along at least a portion of its price lows, not an upward one.
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• The upper portion of the cup shows that the buyers are taking center stage, pushing forth a bullish narrative.

While initially meant for long-term investing, the pattern’s flexibility allows it to be adapted to short-term trading strategies as well. It’s all about measuring the pattern’s height, deciding on your profit target, and then wisely entering and exiting the market. The name of cup and handle pattern time frame this pattern, ‘Cup and Handle,’ derives from its visual similarity to a physical cup with a handle. This is a positive sign in trading, characterized by an initial decline in prices, followed by a period of consolidation and subsequent increase, forming a U-shape – the ‘cup’.

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To reiterate, different zones of the cup and handle pattern are supposed to show different volume metrics. The formation of the cup should be followed by dropping volumes. And when the handle pattern forms, the volume should go even lower before pushing out or surging to validate the price breakout.

Patterns are when the price action resembles a common shape like Rectangle, Triangle, Cup and Handle, Head and shoulder etc. These are the visual pattern that provides an excellent risk to reward ratio trades. Here in this article, we will explain to you the cup and handle chart pattern formation. The Cup and Handle is one of the classical pattern used by the traders. The pattern occurs on all the trading timeframes, and it indicates the reversal and continuation signals. On higher timeframes pattern even take two to three months to print the complete formation.

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?It is difficult to overestimate the importance of the classic continuation and reversal patterns. For a real trader trading on the Forex market, it is huge, because these patterns make it possible to predict the behaviour of the price. ??If one of the trend continuation patterns appears in front of us on the chart, it means that the usual correction… The potential profit target of a ‘Cup and Handle’ pattern is calculated by adding the distance from the bottom of the cup to the breakout level, to the breakout level itself. The Cup and Odd Handle Pattern include a less rounded bottom that makes the Cup look like a ‘V’ shape and an odd-looking non-linear line signifying the Handle. The Handle is not more than one-fourth of the Cup’s total length and does not look like the regular Handle.

As the cup is completed, a trading range develops on the right-hand side, and the handle is formed. A subsequent breakout from the handle’s trading range signals a continuation of the prior advance. Another issue has to do with the depth of the cup part of the formation. Sometimes a shallower cup can be a signal, while other times a deep cup can produce a false signal.

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