Cup and handle pattern strategy was developed by a famous trader named as ” William J. O’ Neil. This was the person who founded his own stock firm. He published this Cup and Handle pattern Strategy in his book firstly named as ” How to make money in stocks ”
cup and handle pattern Strategy
This name is awarded to this technique due to its similarities in shape with a cup of tea having it’s handle. This trading strategy is considered to be one of most reliable and trustworthy strategy. These patterns demand much time for their foundation. This reason makes it to be trusted.
These patterns are bullish continuous patterns. In most cases on left side there is presence of a run out. The increasing trend can be shown as stopping and then making a high peak.
Like other articles on this websites, in this article we shall provide all detail about cup and handle pattern strategy. No doubt it is one of the best reliable patterns in the trading world. These patterns provide us exact technique for trading which is necessary for a trader. Now we will discuss all the main points related to this particular strategy. In this session we will try to uncover all the queries popping up in our minds related to these patterns while trading in such market. This might help a lot to the beginner as well as the professionals of this trading world. This is basic to advance expansion of the topic. Let’s move forward.
The most important aspects which will be explained in the informative session are given below :
- What is actually meant by Cup and handle patterns.
- The main components of these patterns.
- What is the phycology of the patterns.
- Brief description of Cup and handle pattern Strategy.
- How we can trade via these patterns.
- The best time ofentry in these patterns.
- Right method of Existence from these patterns.
- What are targetoptions in these trading patterns.
- Stop-loss settlement in these.
- conclusionafter this explanation.
Cup and handle chart patterns:
These important patterns come into being in all of time frames including small time space ( two- minutes ) and large periods ( daily, monthly). It is produced when there is downward trend for prices starts.
In upward trend it provides U-shaped cups. It is need to keep cup greater than the handle.
In downward trend it provides handles in cup and handle trading strategy. This handle can adopt the format like triangle. Avoid to keep it below.
These charts patterns come to exist at that time when the value of some asset increase or decrease ( changes ) in such a sense that make it’s similarities with any proper shape that is triangle or rectangle .These proper patterns lead us to trade. These help us a lot of information which leads us to the point for specific entrance. Also set up a position of stop from loss. This over knowledge of exact loss position minimize the risk of loss.
These patterns also fix the price for any useful trading. A cup and handle chart indicates a reversal pattern or a continuation pattern. This pattern occurs while the variation of trend in values.
Till this we have briefly explained all about the cup and handle patterns. Now, in addition to this we will explain the possible formation of these patterns. This explanation includes the parts of these patterns. Really it’s good time to discuss:
The main components of these patterns:
Normally these cup and handle patterns are the sum of three basic parts. These components are mentioned below :
- Cup of that pattern
- Then the Handle of each pattern
- The previous bullish continuous trends.
The other main point to remember is that the cup is a specified retracement. Till now we built an idea that actually how these patterns grown up.
After all of this experience it is necessary to describe the psychological reasons which lead it further. Now let’s discuss the phycology behind these patterns’ working method.
What is the phycology behind the patterns:
Psychology of the patterns:
Every component from above mentioned parts “ Cups and Handle “ actually indicates the special case of crud behavior.
The cups formed when the buyer intent to buy moves down. As the result of moving down buyer power. It doesn’t indicates that by decreasing buyer power ; the seller power increases to take further step in trading ; and chances of Change in trends decreases. The bottom line reveals that these buyers are in limits and by these controls peaks can be indicated.
Now in-depth research of Handle reveals the upcoming trap. This range will set up the stage for continuing production of Bullish trend. At this stage some of traders consider this as a double top trend. This may trap the unknown sellers of market.
We explained in this the nature of cup and handle Patterns. Now after this it’s time to expand the strategy. This is the main thing for the traders to know the method of earning profits by using this strategy.
This will show the effective trading strategy.
Brief description of Cup and handle pattern Strategy:
Till now we have talked only about the cup and handle Patterns that what actually these are? How these are formed? What is basic structure of these patterns?
But it’s time to know how this strategy is helpful in trading. So we will talk about the rules for trading which actually shows us particular from other traders of our industry. The proper use of these makes such trader individual. This use can help a trader to make it most from trading. This pattern can be used both for long and short time spaces.
The major steps which lead to best trading strategy are given below:
5 Steps for profitable trading strategy:
- Identification of any uptrend and then round the retracement into that specific trend.
- Now make the 2nd part of these Cup and Handle patterns.
- Keep in mind that the first entry should be at the breakout occurs in handle and same like the second entry might be on break through present on the Cup.
- Take this profit by the equal distance in value meanwhile it is measured between the start of cup peak and end of cup peak.
- Now enter 1st stop under the round bottom . After entrance of 2nd trend move all stops below from handle low swing.
Now after discussing all the questions related to the “Cup and Handle Patterns strategy” we shall conclude it. It is ever more used strategy due to its easy use. Many traders are using it for their good benefits by having idea about it’s method of trading.
I hope all of you learnt a lot from this small but comprehensive topic. This is easy to swallow for everyone in this field irrespective of their experience in this field.
In this topic we have uncovered the things related this like we talked about what is actually cup and handle Pattern ? Why we call it cup & handles? How can we use this for our benefits? How we can get idea of stop and enter in such a trade.
If you have any question please inform us below in comment. Which is more admirable in this strategy? Tell us below. If you want to learn more then visit other pages.