Cup And Handle Pattern Time Frame

Cup And Handle Pattern Time Frame

trading cup

We explore the cup and handle pattern, as well as the inverted cup and handle, and show you how to trade when you recognise these patterns. Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar. The handle formation should only be the top half of the cup formation or less.


However, you could opt to hold a portion of the trade for further gains if you see price action continuing to trend upwards. The yellow line on the chart is an upward trend line, which measures the bullish activity of the price action. You could hold the trade as long as the price action is located above the yellow bullish trend line. The break through the trend line is shown in the red circle on the chart, which would signal an opportune time to close out the trade in its entirety.

Monitoring Volume

Since we’re splitting our trade into two trades, we’re going to have two protective stop loss. The initial stop loss is placed just below the round bottom. You are simply projecting the same distance in price to the upside using as a starting point the initial Cup peak. Doing this in two parts gives us additional confirmation which will be a great way to improve the performance of this strategy. The rounded bottom really shows the buyers are in control and thus new highs should be expected.


At times, the right side of the cup handle has a different height than the left. In this case, it is wise to use the smaller height and add it to the breakout point for a safer target. Traders can also use the larger height to achieve a more aggressive target. A stop-loss order saves traders if the price drops, even after a stock forms the cup and handle chart. The stop-loss will sell off the stocks as soon as the price goes down to a specific price set on the handle. The above is another example of a cup and handle pattern, but in the reversal pattern, which was formed in the ETH/USD daily chart.

The take targets for the Cup & Handle corresponds to the two targets we mentioned earlier. Your first take profit target should be located on a distance equal to the size of the handle, starting from the breakout point. If this target is completed, you can then start pursuing the next target. The second target is located on a distance equal to the size of the cup, applied again from the moment of the breakout.

The second should also be applied downwards right from the moment of the breakout. See that the target has been applied downwards from where the breakout occurs. You should also set targets for this type of formation.

Trading the Cup and Handle Chart Pattern

Thus, you can watch for price action clues in order to extend the gains from the trade. As we point out earlier, you would prefer to open a trade after confirming the Cup with Handle pattern. If the pattern is bullish, the signal should be a bullish breakout through the handle. The Cup and Handle pattern is a chart figure, which has a bullish potential. The pattern could appear after a price increase or a price decrease. Of course the pattern has its bearish equivalent, the Inverted Cup and Handle, which we will touch upon later as well.

But merely the cup and handle chart pattern is not enough to profit. Rather, you must also know exactly when to buy for ideal, low-risk entry points. Trading with the cup and handle pattern differs slightly when using it to trade forex and equities. The volume function is often used in stock trading as a spike in volume indicates the breakout which confirms the entry signal. The cup and handle pattern occurs regularly within the financial markets. Incorporating the cup and handle strategy within a trading system can enhance a trader’s market analysis technique.

  • The inverted cup and handle pattern is the opposite and shows bearish intent.
  • While the cup and handle pattern can be useful as an indicator, there is no guarantee that stock prices will rise.
  • Order execution should only occur if the price breaks the pattern’s resistance.

The breakout signal can occur in different ways depending on the trader’s preference. Some trader’s look at the resistance level taken from the horizontal between the highs of the cup. Other traders use a break of the handle trendline as a long entry point. Most traders set a target by adding height to the breakout point of the handle, irrespective of the cup’s height. For example, if a cup forms between $40 and $39, and the breakout point is $40, the exit strategy should be at $41.

We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. 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. Once again, make sure the handle isn’t too deep of a retracement; you want it to be only the top half of the cup pattern or less. Once the right side of the cup is equal to or close to being equivalent to the left side, the cup is considered complete. The third and final point is to select a profitable exit or profit target.

We have discussed many different types of chart patterns to date. Today we will talk about a somewhat lesser known pattern but one that is still highly effective. I am referring to the Cup and Handle Pattern for Forex trading.

Before reaching the Target 2, the price action experienced a pullback, that is, a weak bullish move. The first take profit target should be located at a distance that is equal to the size of the handle. It works by exiting a trade if the price action begins to go against you. The handle breakout is a way of confirming the pattern. It should be equal to the size of the bearish channel created around the handle. This bullish price move created the handle of the pattern.

How successful is cup and handle pattern?

✅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… A rounding bottom is a chart pattern used in technical analysis that is identified by a series of price movements that graphically form the shape of a “U.” If a cup and handle forms and it is confirmed, the price should see a sharp increase in the short- to medium-term.

Forex trading does not normally use this function, and instead involves other more conventional breakout confirmation methods such as breaks above resistance. The rest of the process is the same when trading the cup and handle pattern. When you identify a cup and handle pattern on smaller time frames e.g. 15-minute, zoom out to see the larger trend in higher time frames e.g. daily. A double bottom has a ‘W’ shape and is a signal for a bullish price movement, as price has hit a support level twice and failed to sell off further. The bulls have the upper hand here, and as they buy, prices will rise. The cup and handle pattern is where the price initially declines, then levels off and begins to rise again, thus resembling a cup with a handle.

This bullish price move slows down gradually and eventually becomes bearish. The formation of the handle also begins immediately after the formation of the cup. The price action begins by making a gradual bearish move. The first target is equal to the size of the channel during the handle.

After the price of the asset hits the top of the cup, it begins to move sideways or slightly downwards, forming a handle in the process. However, if the handle goes below the lower half of the cup, then the pattern is no longer a cup and handle. The handle isn’t supposed to go below the top third of the cup as it would make it lose its cup and handle pattern. If the pattern is bearish, sell when the price breaks the handle downwards.

The cup signal, however, is essentially the same as the cup and handle. The main difference is that the entry price level for a trade will be different. A profit target can be set above the cup at twice its height. Thus, the depth of the cup has a direct bearing on how strong bullish price breaks are expected to be.

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While the price is expected to rise after a cup and handle pattern, there is no guarantee. The price could increase slightly and then fall; it could move sideways or fall right after entry. While the cup and handle pattern can be useful as an indicator, there is no guarantee that stock prices will rise. The cup and handle pattern is a bullish pattern, meaning once the pattern is over there are chances for the stock price to increase. REEMF started one in April of 2019 and went all the way to the end of May before spiking up.

Cup and Handle Pattern Target

Technical indicators work better when used in conjunction with other signals and patterns. In particular cup and handle patterns, various limitations have come up over the years that have been discovered by traders and investors. First, this pattern can take some time to take full shape. However, it fails to continue increasing in price and instead reverses and trends downward. The cup and handle pattern is a pattern that traders use to identify whether the price of an asset will continue moving upwards. As the name suggests, the pattern is made up of two sections; a cup and handle.

This rally failed to reach the measured move target at 50, calculated by adding the four-point depth of the cup to the resistance line near $46. The tables turn once again when the decline stalls high in the broad trading range, giving way to narrow sideways action. Short sellers lose confidence and start to cover, adding upside fuel, while strong-handed longs who survived the latest pullback gain confidence. Relative strength oscillators now flip into new buy cycles, encouraging a third population of longs to take risks. A positive feedback loop sets into motion, with price lifting into resistance, completing the final leg of the pattern, and breaking out in a strong uptrend. This time, we apply some trading rules on the inverted cup and handle pattern.

Microsoft Corporation printed two non-traditional cup and handle patterns in 2014. It topped out at $41.66 in April and pulled back to the 38.6% retracement of the last trend leg. Price carved out a choppy but rounded bottom at that level and returned to the high in June. It then ground sideways in a consolidation pattern that lasted for more than five weeks, or close to half the time it took for the cup segment to complete.

First, approximately one to three months before the “cup” pattern begins, a security will reach a new high in an uptrend. Second, the security will retrace, dropping no more than 50% of the previous high creating a rounding bottom. Third, the security will rebound to its previous high, but subsequently decline, forming the “handle” part of the formation.

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