What is the Cup and Handle Pattern?
Cup and Handle
Forex Trading Glossary
Quick Answer: A cup and handle is a bullish continuation pattern featuring a rounded base followed by a shallow pullback before breakout.
What is the Cup and Handle Pattern?
A cup and handle is a bullish continuation pattern where price forms a rounded bottom (the cup) followed by a shallow pullback (the handle) before breaking higher.
Identifying the Pattern
- Cup formation: Rounded decline and recovery to prior resistance.
- Handle pullback: Light retracement that forms a small descending channel or flag.
- Breakout: Close above cup resistance on increased volume.
- Target projection: Depth of the cup added to the breakout level.
Quality Checklist
Handles should drift lower on declining volume. A handle that sells off sharply weakens the pattern.
Trading the Cup and Handle
- Entry: Buy the breakout or anticipate inside the handle with tight stops.
- Stop placement: Below handle support or the midpoint of the cup.
- Profit targets: Use measured moves and trailing stops to capture extensions.
- Context matters: Confirm that the broader trend is bullish.
Related Terms
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