Cup and Handle pattern is a continuation pattern and to trade it, you need to follow these steps:
- Identify a prior uptrend/downtrend on the currency pair you want to trade. You can use price action techniques or technical tools like Trend Line Fibonacci to confirm the trend direction.
- Look for a rounded bottom/top that resembles a cup or a bowl, followed by a small pullback that forms the handle. The handle should be downward/upward sloping/ascending but not too deep/high or too long/short, and it should form in the top/bottom half of the cup pattern.
- Put a trendline on the short term up/down trend, and wait for the market to make a short term up/down trend in the opposite direction of the short term up/down trend and brakes the up/down trendline before you take a long/short position.
- Stop loss gose on the first high/low that makes the short term up/down ternd and take profit is going to be 1/2 risk reward .
See example above: