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How the Cup and Handle Pattern Works

The cup and handle pattern is one of the events that can arise in trading. Although this pattern does not occur often, you need to pay attention to it seriously if one day it occurs. As the name suggests, this pattern will create a cup with a handle at the end.

How the Cup and Handle Pattern Works

This special pattern does not just arise like that. There is a meaning that is contained in it. Traders need to know very well what might happen. Many opinions say that this pattern provides good signs. But, is that true?

Understanding Cup and Handle Pattern

This cup with handle pattern is not an occurrence that occurs once or twice. This cup and handle pattern has been put forward by a trader and novelist, William J. O'niel in 1988. A more complete explanation can be seen in his novel entitled How to Make Money in Stock.

The emergence of the cup and handle pattern is signaled by the number of a relic that drops over a period of time. Then, the price went up again, resulting in a painting like a cup. After that, the price went down again to make a painting of a handle.

This method of making the cup and handle pattern can take anywhere from 7 to 64 weeks. The style that is about to emerge next is in a very sharp bullish direction. This can be a feature for traders to prepare themselves with the latest trends.

Reverse Cup and Handle Pattern

This pattern can also appear overlapping or is often called the reverse cup and handle pattern. Basically, the shape that will appear in the diagram is like a cup. The problem is, the cup hole leads to the bottom.

The features that appear in this pattern will be the exact opposite of the usual ball. The price will fall at a certain point, then rise until it forms a cup. After that, it will go down to a certain point and go back up to make the handle.

This cup pattern and the overlapping handle will indicate a bearish style afterward. However, you always need to confirm the shape of the pattern before quoting the steps. The pattern that has been created may not show a bearish style if there are other factors that influence it.

Cup and Handle Pattern Introduction

You must pay close attention to the pattern of the leftover numbers that are created. Of course there are many aspects that influence it. The next method is to recognize the cup and handle pattern.

1. Power cup

Cup is a significant aspect of reading this pattern. The potency created by the diagram certainly can't be very basic. This power will be created from the pattern of depreciation and the rise of legacy prices.

Appropriately, the associated price depreciation should not be more than 50 percent. If it is larger, the legacy number will be more difficult to return to the initial price. This can just eliminate the cup and handle pattern.

2. Cup shape

Not only power, the shape of the cup must also be observed. The cup pattern that emerges must be a U, not a V. The U graph that appears is the result of an affirmation away from the intertwined force. That is, not down after it rose with lightning.

Some opinions say that the farther up the cup is, the stronger the sign. That is, you need to start paying attention to there will be a change of style.

3. Volume

The trading load in this emerging pattern should be tracking the price. When it goes down, the trading load must also go down and vice versa. Not only that, the capacity at the bottom of the cup will also be smaller than in general.

4. Position of the handle

The holding pattern arises from the price contraction that occurs after the escalation. The raised handle must be above the cup, at least appearing in the upper third of the cup. The handle does not arise from the center or bottom of the cup.

Disadvantages of Cup and Handle Pattern

All technical analysis has limitations. The pattern of the cup and the handle are also not free from these limitations. Many other aspects are needed than simply creating patterns.

Initially, you need a fairly long time to carry out the analysis. As has been said that the making of this pattern can take up to 64 weeks in duration. After waiting for that long, it is not certain that the desired style will really arise.

On the other hand, the problem of pattern form that arises also needs to be re-introduced. You have to make sure the pattern that appears is really like a cup.

The power part of the cup also needs to be looked at. Wrong, you just want to get an illegal sign. Worse still, you have done a large amount of buying behavior.

Strategy Using Cup and Handle Pattern

The cup and handle pattern can be used by anyone, especially for newcomers. However, you must know the right time to start using it. Next guide using the cup and handle pattern.

1. Enter when the grip pattern is formed

This pattern can help you make a profit. However, you must know the right time to buy and trade it. The more fitting, the more profit received.

A very good time to start buying relics is when the handle is created. For that, you need to look at the pattern of the cup first while accumulating capital. When the handle is created, you can buy it right away.

2. Set stop-loss

The cup and handle pattern will calculate force to 100 percent accuracy. While there may be a philosophy that you already know is wrong. It turns out that after the handle is created, the legacy number may decrease even more.

Therefore, you must always provide a stock concept by deciding on a stop-loss. Stop-loss is selling the stock you have when you are facing depreciation to reduce the risk of loss. You also need to know if you have to practice this strategy.

The handle will rise from the top point to the bottom of the cup. When the force doesn't go up, try to make a stop loss quickly. Make sure to sell the relic when it reaches its buy point. If you can't match correctly, at least stay away from very small numbers.

3. Ensure the time to sell all assets

The goal in trading is to make a profit from the buying and selling prices. You must know the exact amount you want to achieve. It is possible that the legacy number will increase greatly after the handle is created. However, has it lived up to expectations?

If you have, run a sell activation to quickly make a profit. If you haven't, you have to make sure you want to postpone marketing until then. This is a problem for day-to-day traders.

There is nothing wrong with selling even if you only get a small profit. After all, you can allocate it to other relics that provide patterns for style enhancements. The point is, stay away from greed to get bigger.

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