Cup & Handle is a so-called bullish candlestick pattern that resembles a teacup and is considered one of the most reliable buying formations if you want to safely enter a rising trend in the market. In this article, we explain what the Cup & Handle pattern is. You will learn how to trade it, as well as the most important details in terms of being successful with a trade based on the pattern.
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The top factor
It is important to understand that the pattern rarely becomes perfect, but there should be some similarities with a cup with a handle. The most important factor is that the handle should be smaller than the cup. The bottom of the handle should be in the upper half of the bowl/cup, and preferably in the top third.
For example: If the cup is formed between 90 and 100 kroner (price examples), the handle should be formed between 100 and 95 kroner, and preferably between 100 and 97. If the handle is too deep, you should avoid trading based on the pattern.
The larger the timeframe you look at, the stronger the pattern. If you find a pattern on a daily chart or a weekly chart, it is thus far stronger and more reliable than if you find it on a ten-minute chart.
Two types of patterns
One can say that there are two types of Cup & Handle patterns. Those that are formed as a bottom formation, and those that are a continuation pattern in an existing trend. You see an example of a Cup & Handle as a bottom formation on the chart below:
