Introduction to Cup and Handle
In the trading world there are a lot of indicators to represent the market trends which help traders to decide when to invest in the market and also to understand the market trends better. One such indicator is the cup and handle charts.
For new traders, understanding the cup and handling chart patterns is important as it helps them to get familiar with the market trends and can prove beneficial for establishing their feet in the trading world.
What is a Cup and Handle? What does it tell you?
A cup and handle pattern is a technical pattern that indicates bullish trend in the market and is used by traders as a signal that the market is in uptrend. With the help of the cup and handle pattern, the traders can spot opportunities in the market to go long.
This pattern resembles a cup and handle shape, where the cup is “u” shaped and the handle has a slight downward drift. The cup and handle pattern can be formed in a period of seven weeks which is considered short or it can extend as long as 65 weeks.
Traders usually use this pattern as a part of technical analysis and they are advised to place a stop order above the upper trending handle of this pattern. While analysing this cup and handle pattern you have to consider three important factors— length, depth and volume. Cups with longer and more “u” shaped bottoms indicate a strong signal , it is advised to avoid cups with “v” bottoms. The cups should not be overly deep, it is advised to avoid overly deep cups. Volume decreases when prices decline and increases as they rise.
