When taking a look at appropriate ways to implement pivot points, you will notice their primary use is to determine the overall trend of the industry over multiple time frames. Pivot points are relatively straightforward indicators that are summed up and utilized every day for cryptocurrency trading. However, the cup and handle configuration belongs to a varying group of patterns. This Configuration is known to be a bullish sequence pattern, thus providing purchasing opportunities to crypto traders who spot them on charts. From the label itself, this configuration resembles a handle and cup. The handle is formatted in an “n” shape or sometimes a triangular shape. The cup resembles a “u” shape.
The Cup and Handle Structure
The cup and handle structure is straightforward and consists of a cup and handle as the main elements. Chartist William O’Neil first presented the design in the 1980s. Keep in mind that the pattern does not appear that often, but it provides rare trading possibilities. Nonetheless, make sure you proceed to trade as soon as you distinguish a cup and handle structure. Instant trading has proven to be an effective strategy.
Analyzing the Charts
In any given chart, you will observe sections where the prices begin to descend, creating a fresh low after the preceding two lows. This point onwards, it raises higher in a sustainable manner, creating a consistent rise. The final high before a consolidation phase or halt should be at equal levels to the starting level before when prices started to drop. Tracing a curve line onto the graph will form the “U” shape. If you are looking for a faster means of trading cryptocurrency, consider trying Nakitcoins.
When drawing the cup and handle structure, avoid cups and handles whereby the cup is more of a “V” than “U” shape. The distance needs to be distributed over time for it to take the “U” shape. Also, avoid overly deep cup shapes that bear a lengthy distance between the bottom and top of the cup. When the value is back to levels equal to the earlier highs, the value action enters into the second stage. A small downtrend appears momentarily, either in the form of a triangle or descending channel. Remember that the handle needs to be smaller than the cup. Also, it should ideally remain in the upper third part of the “U” figure. Avoid trading patterns where the handle dips too wide or low.
Trading cup and handle pattern
Once the cup and handle structure is activated, the handle automatically breaks to the upside. At these times, it is advisable to hold until that specific handle closes before beginning a long trade. To limit losses if Bitcoin value falls, a stop-loss is placed in a cup and handle pattern. Any moves beneath the stop-loss mark trigger the system and nullify the entire pattern. Sometimes you may notice a slight dip in prices because the bigger players use this same guide.
This bullish continuation guide is rare and takes time to form fully. The risks may also be high in some cases, but it is worth it. Therefore, using a cup and handle pattern requires patience and determination. Once you fully grasp how the pattern works, it proves to be dependable and effective.