Knowing how to see and interpret graphs is among the very essential elements of trading. We research the cup and handle pattern, in addition to the left handed cup and handle, and explain to you just how you can trade whenever you reevaluate these routines.
CFD Shape Market liquidity
Anzl Killian | Financial author, Johannesburg
What really is just a ‘cup and handle’?
A ‘cup and handle’ is really a graph pattern which might assist you to predict future price moves. It receives its name out of the tea-cup contour of this pattern. It’s considered among the crucial indications of bullish continuation, frequently utilized to spot buying opportunities.
The cup and handle chart pattern comes with several limitations. Primarily, it doesn’t occur inside a particular period. Some times it creates inside a day or two, however it might use upto annually to your own blueprint to completely form. Second, you have to master how to spot the length and thickness of a genuine cup and handle, so since there are false signs. The more and rounder the floor, the stronger the signal. Nevertheless, the cup must not be ‘v’ shaped or overly heavy. Last, illiquidity also limits the cup and handle by fully forming as trading volume additionally affects an advantage ‘s price.
Remember you need to use your understanding and risk urge to determine if you’re planning to trade predicated on ‘buy’ or’ ‘sell’ signs.
How to recognize the cup and handle pattern
To recognize the cup and handle pattern, begin with following price movements on a graph. The design starts to make whenever there’s a sharp downward price movement on a brief moment. That is accompanied by a stage at which the purchase price remains relatively stable. Afterward, there’s a rally which is pretty much corresponding to the first reduction. These motions make a ‘u’ contour on the graph – that is called the cup.
Once the purchase price has already reached the cap of the cup, then it starts moving backward or marginally downwards to shape the deal. In case the handle falls under the lower 1 / 2 the cup, then it’s nolonger a ‘cup and handle’ design. Typically, the handle must not dip below the very top third of this cup in order for this to be described as a cup and handle pattern.
How to trade once you find the cup and handle pattern
You are able to utilize derivatives such as CFDs or disperse bets to trade once you find the cup and handle design. With derivatives trading, then you overlook ‘t own the underlying asset, which means you can go long (buy) or short (sell).
This is useful when trading both the cup and handle and the inverted cup and handle, because you can speculate on upward or downward price movements.
To trade the cup and handle pattern and take advantage of these price movements, follow these steps:
- Log in to your Forexmntrading account
- Search the market you want to buy or sell in the ‘market ‘ panel
- Choose your position size
- Select ‘buy’ if you think the market will rise, or sell if you think it will fall
- Confirm the trade
If you’re not ready to take on the live markets, you can open a risk-free demo account to identify the cup and handle pattern and practise your trades.
You could also place an order above or below the handle to buy or sell when the asset reaches a more favourable price. An order allows you to open a position at a price you choose, rather than the one currently being quoted.
Follow these easy steps to place an order:
- Log in to your Forexmnaccount
- Search the market you want to trade in the ‘socket ‘ panel
- Click on the ‘sequence ‘ tab
- Enter the details of the deal in the order form
- Confirm the order
Cup and handle summed up
- The cup and handle pattern is considered one of the key signs of bullish continuation, often used to identify buying opportunities
- To identify the cup and handle, follow price movements on a chart and look out for the ‘un ‘ shape and the downward handle
- There are some limitations of the cup and handle pattern, relating to its timeframe, length, depth and the underlying asset’s liquidity
- An inverted cup and handle is used to identify selling opportunities, as it is a sign of bearish continuation
- The inverted cup and handle moves in the opposite direction as a cup and handle, forming an ‘n’ shape and an upward handle
- You can trade the cup and handle (or inverted cup and handle) using derivatives such as CFDs or spread bets
- With derivatives, you can go long or short because you do not own the underlying asset
To start trading, open a live Forexmnaccount now. If you’re not ready to start straight away, you can practise your trades on a risk-free demo account.