Cup and Handle Pattern in Forex Trading

Introduction

When you observe certain things happening again and again in a different way, it is important to pay attention to and learn about them. This habit of observing helps in life and the stock market. In Stock marketing, we notice multiple patterns and charts that predict market prices and changes.

When you see this pattern, it is like a cup with a handle on it. This Cup and handle pattern shows the ups and downs in the prices of the Stock market.

The cup and handle pattern in trading shows ups and downs, just like life does. When we see this pattern happening again and again, it’s a signal to make better choices. Want to learn more about it? Let’s discuss it more about this pattern.

What is the Cup Handle Pattern?
The Cup and Handle Pattern is a candlestick chart pattern shaped like a cup with a handle. Conventional traders use it as a reliable breakout strategy.

It is a dependable indicator for traders to predict when prices may spike higher. They trade at the breakout point after waiting for the pattern to fully form and anticipating a significant upward rise.

It is considered a strong indicator that prices may increase when combined with the concepts of supply and demand.

Analysis of Cup Handle Pattern

The cup and handle pattern resembles a teacup on a chart. The handle is the smaller part below the cup.

The price first drops, then goes up, forming a “U” shape. After that, it drops a bit but not as much as before and then goes up again, making a smaller “u or v” shape. This pattern is seen as a good sign that prices might go up. Once the handle is finished forming, there’s a point where prices could break and go even higher. That breakout point is when the handle is complete.

In easy words, we can also say that this pattern explains that the buyers are trying to take the price up by overpowering the sellers.

The formation of the cup takes place when the price steeps low but also recovers to its same point. After the formation of the cup takes place then the price of the market tries to stoop low but it is not equivalent to the depth of the cup and a strong pullback makes the handle part.

What is an Inverted Cup Handle Pattern?

The inverted cup and handle pattern is the opposite of the regular cup and handle. Instead of signaling an uptrend, it signals a downtrend. The “U” shape in the cup indicates the prices going high and low on the market.

Then, a “U” shape forms, and the price reaches a new high by moving sideways. This new high of the pattern is slightly lower than the previous one, and then it again falls down, resulting in the “U or V” shape. This “U or V pattern is identified as a Analysis of Inverted Cup Handle Pattern

The inverted cup and handle pattern shows a potential shift in the direction of a trend. When it appears during a downtrend, it suggests that the downtrend might continue in the trading market.

But if it shows up during an uptrend, it could mean the trend is about to change. Usually, when this pattern forms and there’s a breakout, it often leads to a downtrend. Traders might take advantage of this by selling short.