This figure is so popular because of their quite clear and specific rules, in addition, the figure gives an excellent risk / benefit ratio.
How to identify the model?
The formation of the model is divided into 4 stages:
1. The price has been rising for some time;
2. After the correction begins to about half of the previous growth, this is how the bottom of the cup is formed;
3. Then the price starts to rise to the previous high and goes down, unable to break through the resistance; this is the checkpoint;
4. Then the price breaks through the high again, after which it rises further, approximately to the height of the depth of the cup.
How long does it take to form the model?
a cup with handle It takes anywhere from a few weeks to six months to form, which is why it is suitable for a long-term trader. It is very important to form a handle which should be completed within a month, otherwise it may mean that the up move is weak and there may not be a breakout.
Characteristics of the cup and the handle .
A Cup round indicates consolidation, while a Cup V-shaped indicates too steep an inversion, which is not good.
the depth of the Cup it should be equal to one-third to one-half of the previous upward growth.
The mango must not fall more than a third of the profit of the Cup . Also, a short and weak drop in the handle indicates that a breakout can be very bullish.
How to negotiate?
The best entry point is handle . At this time, the price is falling and forming a downtrend, the trader should enter the trade when the price breaks this downtrend.
To determine the goal, you need to measure the distance from the bottom of the cup to the beginning of the handle; this distance is above the breakdown of the maximum and will be our target.
In addition to the main method of determining the target, you can use Fibonacci lines: the 100 percent line is considered a conservative target, and 162 percent is considered aggressive.
No matter how well the figure is formed, do not forget about the risks and the fact that the price can turn against you at any moment.
Set the stop loss below the low of the handle, then you will protect yourself from big losses.
This figure is not for nothing so popular, it is very profitable and has clear rules, which facilitates the work. Be patient, because the figure is formed over several weeks, or even months. Don’t go too soon, without waiting for the Cup and the handle . Premature entry promises losses.
Who knows how to wait, everything stays!