Binary Options Trading Cup and Handle Pattern
The cup with a handle is one of the most popular terms you will come across in the market. This is because it is one of the best base patterns that can be used in the trading market to analyze high-growth stocks. In the past, this pattern has preceded some of the biggest stock runs in the history of the market and indicates an extremely strong buy point for investors. Typically, the cup and handle is considered to be a bullish pattern in continuation, marking a pattern of a consolidation period and the breakout that comes after it.
If you are looking for a cup and handle pattern, you need to look out for a u-shaped path followed by a lowering slope. The cup in this pattern, which is made by the stock prices track, is typically spread over multiple weeks. It should be observed that the decline of this U-shaped path does not exceed 35% in any case. After reaching a certain height, the stock goes downwards, taking a secondary decline that should not exceed 12% forming the handle. The stock then emerges from this decline and moves upward, reaching new price highs.
This is the simple explanation of how this pattern works. However, the pattern is not always that easily decipherable. There are certain details that investors should look out for to ensure that they actually have a genuine cup and handle pattern and not just an assumed one. Here are some things to look out for:
- The complete length of the base which includes both the cup and handle should at least be seven weeks. However, it can span over a year or longer in some cases.
- For determining the buy point in this trend, 10 cents are added to the highest price in the handle.
- During the formation of the handle, the volume should be typically low. On the breakout, however, it should go at least 40% above the average level.
- While the base is going on, there should not be any wide price swings in the price bars. Instead, they should have a calm behavior.
The cup and handle pattern is one of the most trusted patterns in the trading industry that experienced traders like to follow. It is a time-tested pattern that has proved to be successful quite a number of times, bringing in great profits for the investors using this pattern. If you are looking to make a safe trade, this is definitely one pattern that you can trust to work accurately.
Also read about How to Trade Binary Options and learn more about binary options.
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