The profitable Cup and Handle trading strategy might be a humorous name.

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But the cup and handle pattern has a long history and was discovered by the famous trader, William J. Our team at Trading Strategy Guides is working hard to develop the most comprehensive guide on different chart pattern strategies. In order to understand the psychology of a chart pattern, please start here, Chart Pattern Trading Strategy step-by-step Guide.

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As the name suggests, the cup and handle pattern has a similar appearance to a teacup with a handle. Unlike the bullish flag pattern , which is a continuation pattern, the Cup and Handle pattern takes a lot of time to develop. You can also read the simple yet profitable strategy. The cup and handle pattern is a bullish continuation pattern.

Cup and handle chart pattern | How to trade the cup and handle | IG EN

Now, this pattern typically has a run-up on the left side. So, the first Cup and Handle rule is that you need to have a previous trend. You need this in order to have a continuation pattern. It can be contained inside two parallel lines, or it can take the shape of a smaller rounded bottom.

Normally, the handle of a tea cup can take many shapes. This can be the same when reading the price action for the Cup and Handle formation. Then understand the psychology behind this profitable trading pattern. The Psychology behind Cup and Handle Pattern. The cup component forms as a result of the buying power drying out.

The real trap comes from the handle component.

EUR/GBP Price Analysis: Refreshes weekly top above 0.8600 on cup-and-handle breakout

This gradual and slow range is what will set the stage for the bullish trend to resume. People will think this is a double top which will trap some weak sellers when we finally break upwards. Obviously, the Cup and Handle pattern can produce the best profits on the daily time frame. The pattern can be traded on the lower time frames as well.

Step 1: Identify and uptrend and a rounded retracement into that uptrend The Cup. The first step is to identify an uptrend and a rounded retracement into that bullish trend.

The Cup and Handle pattern

That rounded bottom is the first component of the Cup and Handle pattern. The strength and the longevity of the prevailing trend is important as it will determine the success of the trade. How deep the rounded bottom goes will also influence our potential profit. Now we move to the second component of the Cup and Handle pattern and the second step of the Cup and Handle trading strategy. Once you see the price moving away from the cup in a tight range you can start looking to draw the handle.

Next, we need to figure out an entry technique, which brings us to the next step of the Cup and Handle trading strategy. Step 3: Entry 1 at the Handle breakout and Entry 2 at the first Cup peak breakout. The next logical thing we need to establish for the Cup and Handle trading strategy is where to take profits. Step 4: Take Profit equals the same distance in price as measured from the initial Cup peak to the bottom of the cup.

The ideal profit target for the Cup and Handle trading strategy would be equal to the same distance in price as measured from the initial Cup peak to the bottom of the Cup. The Cup and Handle pattern target maximizes the potential profit and it gives us the chance to capture the entire trend.

You are simply projecting the same distance in price to the upside using as a starting point the initial Cup peak. Step 5: Place initial SL below the rounded bottom. After the second entry is triggered move both SL below the Handle swing low. Not wishing to hijack this thread, not sure if Cryptocurrency is still current, but it would be good to get a few more insights. The most amazint thing about the cup and handle formation, along with the inverted one which you have shown, is the fact that you can get into the cup and handle formation before the right side of the cup is form.

Amazing how not one post in such a useful site as this one explains it. Not sure what you mean makeltRainScalper - Do you mean you can see the set up forming before it is complete? Any explanation you can give will be much appreciatedm - I personally have never even heard of this pattern before. I could go a step further and create a video for you to see. Once the trading session is over, I shall return and upload the video.

Basically the video will show you how to enter before the handle and the right side of the cup has formed.

Cup and handle chart pattern explained

Here is a youtube video I created for you. Cup and handle formation. Seems like I was right after all.

I managed to bag a few PIPS, thankfully. I think there is latitude, I look for a gentle curve in the cup as the main thing. Trade Journals. Cryptocurrency May 31, , pm 1. Cryptocurrency May 24, , pm 3. Jerome32 August 13, , am 5.

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