Cup and handle chart pattern

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What is the cup and handle chart pattern?

The cup and handle pattern is a bullish continuation pattern formed in two parts, the cup and the handle. The pattern will start after a strong uptrend which eventually reaches a high, it then slowly retraces with people selling off and taking there profit before a steady rise in value  because of the new low price, this formed the U shape “cup”. Once the price gradually moves higher it will retest the old high, this causes further retracement in the form of a flag pattern, this falling range will complete the pattern forming the “handle”.

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Cup and handle chart pattern

How to trade the cup and handle pattern

When trading the cup and handle pattern you are waiting for a bullish continuation after the pattern has complete, to do this you need to wait for a bullish break out. There are two ways to trade a breakout of the cup and handle pattern. either by waiting for a breakout of the handles range or the less aggressive entry would be to wait until the breakout of the highs of the “cup”

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Cup and handle trade

The less aggressive way is to wait for a breakout of the cup, this shows new highs are forming the price is ready to continue upwards, entering at this point means there is a higher probability the price will continue upwards but this will come at the cost of missing a few points if you would have entered more aggressively.

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Cup and handle aggressive trade

The more aggressive way is to wait for a breakout of the handle, this shows the retracement forming the handle is now over and price is ready to continue upwards, entering early means there is a potential for bigger profits but price may stall around the previous highs.

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