In crypto trading, a cup and handle pattern is a bullish continuation pattern that can indicate a potential continuation of an asset’s current price trend.
The cup and handle pattern is formed when an asset’s price experiences a sharp rise, followed by a period of consolidation that creates a rounded bottom, resembling a “cup.” This is followed by a smaller price consolidation that creates a downward sloping handle that resembles a handle of a cup. The handle is formed when the price retraces a portion of the gains it made during the cup formation.
Traders use the cup and handle pattern as an indicator of potential trend continuation and may use it to inform their trading decisions, such as entering a long position or adding to an existing position.
It’s important to note that the cup and handle pattern is not infallible, and traders should use it in conjunction with other technical and fundamental analysis tools to make informed trading decisions. Additionally, false breakouts and other market factors can sometimes lead to false signals, so traders should exercise caution and use appropriate risk management strategies.