How to Trade a Cup and Handle Pattern
What is a Cup and Handle Pattern?
A Cup and Handle is a technical pattern that resembles a coffee mug and its handle. It is a bullish pattern that tends to find resistance at a particular price and support at two different price levels.
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How does This Pattern Show Strength?
While the handle is forming, its support should be no lower than half the cup's depth. The volume should be lower as the handle is developing, and it should increase as it approaches the resistance level.
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How should I trade the Cup and Handle Pattern?
There are different ways to trade the Cup and Handle pattern. One way is to enter the trade as the handle approaches the resistance level and hold through the breakout. The other is to wait for the breakout to occur and enter over the resistance level.
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Where Should the Stop Losses be Placed When Entering the Trade?
If entering the trade as the handle forms, place the stop loss level at or below the cups' bottom. When entering the trade over the resistance level, the stop loss should be placed at or below the bottom of the handle.
Entry at Handle's bottom
Entry at Breakout level
How do I Determine My Profit Target?
Now that we established entries and stop losses, we need to ensure that we find a reasonable profit target. For this, we need to measure the cup's depth. We need to determine the distance from the bottom of the cup to the Resistance level. That should give us a good idea of a reasonable profit target.
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**This is a condensed explanation of the Golden Cross and Death Cross indicators used for educational and entertainment purposes only. Pennystocksclub13 intends to educate beginner traders with easily accessible and simplified information to shorten the learning curb. Traders should always do their due diligence and continue educating themselves about the risks involved with trading.
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