Trading of cup with handle pattern is not an easy task. These common mistakes of trading cup and handle pattern can damage profits.
Cup with handle is a bullish continuation pattern in technical charts. It can be compared to the typical shape of a tea cup. But, in real time, the right identification along with profitable trading strategy gains significance.
You need to accept some minor discrepancies in this unique pattern recognition while trading. However, these discrepancies often increase the probability of making mistakes & faulty predictions.
Finally, several traders or investors fail to generate profits from this pattern. It is perhaps due to these little ignorance or mistakes that can cost them heavily on their stock portfolio.
Therefore, traders or investors are always advised to take all necessary precautions to prevent such mistakes. Here are 10 potential mistakes or trading errors to avoid in cup with handle pattern:
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(1) Ignoring Overall Trend In The Sector Or Stock
It is one of the most significant mistakes of trading cup and handle pattern. Skilled & experienced technical analysts often dictate that “prevailing trend is your best friend”.
You need to trade along with the prevailing trend in the markets. This concept holds true even when trading stocks that are forming cup with handle pattern.
For example, if the overall market as well as entire sector is moving in a bearish trend then a single stock belonging to a bearish sector is unlikely to show bullish breakout.
Therefore, you should never ignore the prevailing trend in the markets. It is particularly true when computing profitable targets for the script trading in cup with handle pattern. These cup-like patterns are likely to fail anytime during overall bearish trend.
- Cup and handle trading mistakes: NewYork Stock Exchange