Predicting the bottom of the "Cup and Handle formation" | Forex Factory

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Attachments: Predicting the bottom of the "Cup and Handle formation"
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Predicting the bottom of the "Cup and Handle formation"

  • #1
  • First Post: Jan 9, 2018 3:03am Jan 9, 2018 3:03am
Good morning everyone,
I would like to share a nice little pattern that we can hunt for and hopefully add on to with the help of the community. So what is this about? Recall the cup and handle formation? What if I told you we can enter at about 5 - 25% of a 100% correction, however certain conditions must be followed. Let us take a look at the basic stepup on the tf i use it on; 4h Yet, this can be applied on any Timeframe and i wil show examples of it. Shall we begin?
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  • #2
  • Jan 9, 2018 3:08am Jan 9, 2018 3:08am
yes
  • #3
  • Jan 9, 2018 8:44am Jan 9, 2018 8:44am
Let us get started.

First you will simply need two moving averages.

Period: 20
MA method: Simple
Apply to: close
Color: Red

And

Period: 10
MA method: Simple
Apply to: close
Color: Green
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  • #4
  • Jan 9, 2018 9:02am Jan 9, 2018 9:02am
Quoting juisen25
yes
Here is what we are going to look for as this illustration shows "an inverted cup and handle"

Attached Image (click to enlarge)
Click to Enlarge Name: LeftsideCup (1).PNG Size: 28 KB


We highlight the number 1 as it represents the crossing over of the two MA lines given.
We then allow the currency to make whatever move it will make, in this case a move up!
Now look at number 2. That came to be as the second crossing of the MA lines which in this case represents a slowing down in price action.

Here is where you take your trade... Since the move was up and the price action has slowed down we now will assume the price will retrace all the way down creating a 100% reversal which in this case would be an inverted cup and handle. Please note i said assume as we are only trading an expected formation...

Now here is your sl and tp

The red line is your sl.
The purple line represents the 100% correction along with the price the last move you were watching began from.


Simple enough thus far?

Here is the beauty of this method. Not only is it profitable but one of the cleanest formations to enter to within the higher time frames. We must also note that variations must be accounted for and that is what we will go through together as a community. In due time, we would have accounted for all the variations in which we can then come with money management to apply to.
Attached Image (click to enlarge)
Click to Enlarge Name: RightSideCup.PNG Size: 33 KB
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  • #5
  • Jan 9, 2018 1:23pm Jan 9, 2018 1:23pm
Hi Tfh,

interesting, I subscribed.
do we only follow the cross over, two MA.
or we have to see more than that. plz
explain. thanks.
  • #6
  • Jan 9, 2018 3:01pm Jan 9, 2018 3:01pm
Quoting loveandpeace
Hi Tfh, interesting, I subscribed. do we only follow the cross over, two MA. or we have to see more than that. plz explain. thanks.
For right now focus on using those rules on any Time frame. However, depending on how the candles trade at the left side of the cup will determine how your stop loss is honored. Examlple. In the picture you notice that no candle closed at or bekow the red MA line. Meaning the sl is to be honored as mentioned. Where as if any candle would have closed at or below the Red MA line it woulf. Have resulted in a different outcome for the sl.
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  • #7
  • Jan 10, 2018 1:10am Jan 10, 2018 1:10am
Let us take a look at the setup described yesterday during today's price action.
Attached Image

Notice here we have number 1 representing the start of the left side of the cup. Here our baseline is the low of the first candle to close at or below the lower ma line. This is a variation of what we saw yesterday.

Number 2 marks the crossing of the MA line which gives you a sell signal and a stop loss price. Remember the sl is the high of the left side of the cup.

Now let us see how this one played out....
Attached Image
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  • #8
  • Jan 10, 2018 2:23am Jan 10, 2018 2:23am
Quoting Tfh
Let us take a look at the setup described yesterday during today's price action. {image} Notice here we have number 1 representing the start of the left side of the cup. Here our baseline is the low of the first candle to close at or below the lower ma line. This is a variation of what we saw yesterday. Number 2 marks the crossing of the MA line which gives you a sell signal and a stop loss price. Remember the sl is the high of the left side of the cup. Now let us see how this one played out.... {image}
Look here to see how after the tp was hit how we had yet another cup and handle formation on the same tf.

Attached Image
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  • #9
  • Jan 10, 2018 11:28am Jan 10, 2018 11:28am
so, this one was on 5M time frame, and we got 23 Pips aprrox.
do we have to check all TF, if we could find any Cup & Handle formation?
  • #10
  • Jan 10, 2018 11:30am Jan 10, 2018 11:30am
is this only good for EUR/USD??
  • #11
  • Jan 10, 2018 4:59pm Jan 10, 2018 4:59pm
Quoting loveandpeace
so, this one was on 5M time frame, and we got 23 Pips aprrox. do we have to check all TF, if we could find any Cup & Handle formation?
It works with any pair on any time frame. If you want higher frequency then lower the tf. More pips increase it. However, the rules never change. We still have ALOT of work to do. Including a bit of coding. The alot of work deals with variations of the left side of the cup. Those variations will create your stop loss 100%. Some formations the stop loss might be on a touch of the price given or a close at the price given.
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  • #12
  • Jan 11, 2018 6:35pm Jan 11, 2018 6:35pm
Quoting loveandpeace
is this only good for EUR/USD??
Hello everyone. Have a look at the following teade and tell me where the 1,2,3 connection are.
Attached Image (click to enlarge)
Click to Enlarge Name: where.PNG Size: 70 KB
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  • #13
  • Jan 12, 2018 3:28am Jan 12, 2018 3:28am
Interesting!
Understand it must be alot more into it, so I am listening.....
The last example I have a hard time to understand since the left side of the "cup and handle" wasnt a strong move down!
Why did you consider it as a potenial "left side of a cup and handle" at all?

Regards
  • #14
  • Jan 12, 2018 7:02am Jan 12, 2018 7:02am
Quoting nikki
Interesting! Understand it must be alot more into it, so I am listening..... The last example I have a hard time to understand since the left side of the "cup and handle" wasnt a strong move down! Why did you consider it as a potenial "left side of a cup and handle" at all? Regards
Very good question sir.

The left side of the cup can start based on your discretion. Clearly it would have been much wiser to have made the left side of the cup the massive move up to the far left of the chart. However, a 100% reversal of that massive move up was unlikely. Had i decided to predict a cup and handle to the down side then the spike up would have been the sl. Yet, after strong moves on EU pairs i calculate the cup and handle formation from within. Let us see some more charts and why i calculated as i did.
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  • #15
  • Jan 12, 2018 7:06am Jan 12, 2018 7:06am
Quoting Tfh
{quote} Very good question sir. . Clearly it would have been much wiser to have made the left side of the cup the massive move up to the far left of the chart. However, a 100% reversal of that massive move up was unlikely. Had i decided to predict a cup and handle to the down side then the spike up would have been the sl. Yet, after strong moves on EU pairs i calculate the cup and handle formation from within. Let us see some more charts and why i calculated as i did.
I understand what you say, thank you!
I would love to here more and see more charts for sure!
Thanks for sharing!!!

Regards

P.s. I am not a "sir"......
  • #16
  • Jan 12, 2018 7:16am Jan 12, 2018 7:16am
Attached Image (click to enlarge)
Click to Enlarge Name: okiz.PNG Size: 23 KB


The picture above reveals the massive move up. That of course would be the left side of an inverted cup and handle formation. However 15m tf is my max for daily scalps. So since i assumed that it would not recover that same session i decided to take the internal high and low after the move up.

Attached Image (click to enlarge)
Click to Enlarge Name: okiz2.PNG Size: 28 KB


Now. The internal high and low would be the high and the low before the MA line switches back to red as being the top line. Essentially, we are reversing our expectancy from a recovery to an extension but that is only if you are looking back at the massive move upwards. However, if you ignore tthag move then this calculation would be of a recovery of the internal move after the breakout.

1= reveals the high of the first MA cross (This high isnt confirmed until the top MA line goes back to being red.

2= reveals the low of the second ma cross (this low isnt confirmed until the top ma line goes back to being red. Also note that the number two is the bottom of the cup. a simple touch of that low would be the sl)

3 = reveals 100% recovery of internal move. This also mstches up with the tp i showed and took on Trade explorer.



Fire the questions away.
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  • #17
  • Jan 12, 2018 7:27am Jan 12, 2018 7:27am
Quoting Tfh
{image} The picture above reveals the massive move up. That of course would be the left side of an inverted cup and handle formation. However 15m tf is my max for daily scalps. So since i assumed that it would not recover that same session i decided to take the internal high and low after the move up. {image} Now. The internal high and low would be the high and the low before the MA line switches back to red as being the top line. Essentially, we are reversing our expectancy from a recovery to an extension but that is only if you are looking back...
So far I am with you.......
I took about the same trade myself......
I assume there is more......?!?
I have been watching your trades for the last days and I can see you are a very good trader!!!
So please tell me more!
Regards
  • #18
  • Jan 12, 2018 10:19am Jan 12, 2018 10:19am
Quoting nikki
{quote} So far I am with you....... I took about the same trade myself...... I assume there is more......?!? I have been watching your trades for the last days and I can see you are a very good trader!!! So please tell me more! Regards
Why thank you. I am trying different things which work for me. Cup and jandle appears the most. As for their being more; of course.
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  • #19
  • Jan 12, 2018 11:26am Jan 12, 2018 11:26am
Quoting Tfh
{quote} Why thank you. I am trying different things which work for me. Cup and jandle appears the most. As for their being more; of course.
It looks like you found a good way to trade through "cup and handle"
Looking forward to see more......
  • #20
  • Jan 12, 2018 11:34am Jan 12, 2018 11:34am
Quoting nikki
{quote} It looks like you found a good way to trade through "cup and handle" Looking forward to see more......

As the first post revealed, we are "expecting" the formation as a majority of the cup and handle formations Don't have a retest of bottom portion. You decide where the left side begins and then you await the MA cross over rules to find the top and bottom of the cup.
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