Cup And Handle Trading Strategy: (Backtest And Example)

Chart pattern recognition is one of the most popular techniques employed by chartists and technical traders; they constantly study and analyze price movements in hopes of detecting patterns that show the next most probable price movement. While there are many different types of chart formations out there, the cup and handle pattern strategy is one you may want to add to your trading arsenal because of its reliability. Let’s find out what it is.

The cup and handle pattern strategy is a formation on the price chart of an asset that resembles a cup with a handle. It is a bullish continuation pattern that marks a consolidation period followed by a breakout.

As its name implies, the pattern consists of two parts — the cup and the handle. The cup looks like a “u” or a bowl with a rounded bottom that forms after a price rally, while the handle is a trading range that develops on the right-hand side of the cup. The pattern completes when the price breaks out from the handle’s trading range to signal the continuation of the previous rally.

In this article, we backtest the cup and handle pattern strategy. Because the cup and handle pattern is difficult to define with strict buy and sell rules, we refer to other research.

Let’s dive in to learn how to spot this pattern.

Cup with handle pattern

First, we want to write that the cup and handle pattern is also called cup WITH handle pattern. They are the same pattern and formation.