Cup and Handle Chart Pattern: How To Use It in Crypto Trading

The buy point occurs when the asset breaks out or moves upward through the old point of resistance . Here’s how you can scan for the best undervalued stocks every day with Scanz. This is used in conjunction with the Stocks Over Coffee Podcast on Technical Education Cup with Handles. Apple is the largest company in the world with a market cap of 2 trillion.

This moving average indicates the average volume for the last 50 periods. You want to see several bullish candles with volume above the 50-period moving average, while most of the bearish candles remain below the moving average. If a large bullish and bearish volume candle are next to each other, you want to see the bullish candle display a higher volume than the bearish candle. As a result, the trader will need to highlight the old high with a horizontal resistance line. Additionally, as the right side of the cup is created, we need to observe several bullish candles on rising trade volume. An easy way to figure this out is to place a 50-periodmoving averageon top of the volume. Then, new buyers enter the market as they see the technical setup complete, pushing the market above prior highs.

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After correcting, the price rallied back to near the old high to finalize the cup. Additionally, the handle needs to stay in the upper half of the cup and not drop into https://www.bigshotrading.info/ the lower half of the cup’s price range. For example, if the cup forms between a price range of $1.0 to $2.0, then the handle needs to form within $1.50 to $2.0.

As a result, they close out their positions, which adds a little buying pressure to the market, popping the price a little. 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. If the pattern is bullish, buy when the price breaks the handle upwards. The confirmation of the pattern comes in at the green circle at the moment when the price action moves above the handle.

Cup and High Handle

The cup and handle pattern is an effective combination to flush out weak holders. The handle must form in less time than it takes to form the cup. On most occasions, the handle will form in about 1/5 to 1/3 of the time required to cup and handle reversal form the cup. In the end, the pattern takes the shape of a coffee cup with a handle on the right side. The first four components help shape the structure for the pattern’s name because they form the outline of a cup with a handle.

The cup and handle pattern resembles a U shape with a horizontal line, generally drifting downward. You might experience some excess slippage and enter into a false breakout if you use an aggressive entry. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Bullish Cup and Handle Pattern

Determine significant support and resistance levels with the help of pivot points. Check out this step-by-step guide to learn how to scan for the best momentum stocks every day with Scanz. ✅This pattern is not as popular among traders as "Head and Shoulders", "Double Top" and other classic patterns of technical analysis.

At a minimum, these studies indicate at least 50% of aspiring day traders will not be profitable. This reiterates that consistently making money trading stocks is not easy. Day Trading is a high risk activity and can result in the loss of your entire investment. To trade using a cup and handle strategy, place your stop buy order a little higher than the handle’s upper trend line.

Indicators To Identify the Cup and Handle Pattern

The Cup is formed when a series of gentle declines in prices interrupts the uptrend and is followed by an advance to more or less that same level that was reached prior to the decline. This may take the shape of a bowl or a rounding bottom but should not be a V-shape as it should form a consolidation area or a significant support area. Ideally, this decline should retrace about 1/3 of the previous advance and no more than 2/3 of the advance. A cup-and-handle pattern is usually interpreted as a bullish continuation pattern.

I hope newbies know what they are doing and have enough experience and practice with this pattern. Recommend you guys to start with other patterns first instead of this. There is no ranking of importance for the different patterns.

Chart Example of Cup and Handle

78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Below is another chart, a cup and handle example for Ethereum. After rallying 25%, the market corrected lower approximately 50% on increasing bearish volume. Then, the market rallied to come within 3% of the previous high. If the breakout is successful, then you can consider moving your stop loss to the breakeven level, locking in the trade without experiencing a loss.

• If this target is completed, you can then start pursuing the next target.
• The cup and handle pattern appears after a big rally where the market needs to pause and catch its breath.
• After reaching the bottom of the cup, the price begins to rise again in order to make a handle.
• The pattern takes some time to develop, but is relatively straightforward to recognize and trade on once it forms.
• Remember that you should always use your knowledge and risk appetite to decide if you are going to trade based on ‘buy’ or ‘sell’ signals.
• The Cup with Handle trigger signal is at the break out of the handle.
• The cup and handle pattern works best with cryptocurrencies that are growing their following.

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This post was written by costa