Spencer Li

Cup and Handle Pattern Trading Strategy Guide (Updated 2025)

cup and handle pattern trading strategy

The cup and handle is an accumulation buying pattern, which is found during long periods of consolidation, and can lead to powerful explosive moves once the pattern is fully completed.

There are 2 main varieties of this pattern – the cup and handle reversal pattern, and the cup and handle continuation pattern.

In this post, I will show you how to take advantage of the cup and handle pattern to trade breakouts, how to avoid false breakouts, and the best trading strategies for this price pattern.

 

Cup and Handle Pattern Trading Strategy Guide

 

What is a Cup and Handle Price Pattern?

The cup and handle is an accumulation buying pattern, which is found during long periods of consolidation, and can lead to powerful explosive moves once the pattern is fully completed.

In the diagram below, you can see that the price pattern consists of a larger accumulation base (the cup), before forming a smaller accumulation base (the handle), before finally leading to a breakout.

What is a Cup and Handle Price Pattern

From a practical viewpoint, we will usually start to notice the pattern only when it starts forming the “cup” part of the pattern, which is quite identifiable by the smooth gradual curve upwards of trending swing counts of higher highs and higher lows on the chart.

The confirmation will come from the “handle” part of the price pattern, which is like a small pullback before the price explodes upwards. You can think of it as pushing down on a loaded spring, to build up more pressure just before the release.

 

The 2 Types of Cup and Handle Patterns

Unlike other chart patterns, the cup and handle pattern does not work equally for both the bullish and bearish scenario, as it is almost exclusively found in the bullish scenario only. Hence, we don’t hear people talking about “bullish cup and handle” or “bearish cup and handle”, because when they say “cup and handle”, it is understood to refer to the bullish version.

Based on the 2 main categories of chart patterns (continuation vs reversal), most people tend to classify the cup and handle pattern under the “Reversal Patterns” category, however I feel that the cup and handle can be both a reversal or continuation pattern.

In the diagram below, I illustrate the 2 different types of cup and handle patterns.

The 2 Types of Cup and Handle Patterns

a) Cup and Handle Reversal Pattern

In the reversal cup and handle, prices start off in a prolonged downtrend, where they gradually lose momentum and become more sideways. Prices start to bottom out and form a reversal base, before leading to a change in direction.

b) Cup and Handle Continuation Pattern

In the continuation cup and handle, prices are on an existing uptrend, and when the trend loses some steam or takes a pause, prices start to move sideways. The cup and handle pattern helps to buy up more buying pressure, before prices break to new highs and resume the uptrend.

In both scenarios, the context is very different, but the pattern is the same, and can be traded in exactly the same way.

 

Cup and Handle Pattern Psychology

In the cup and handle pattern, as the downtrend starts to weaken (less bears/sellers), the bulls/buyers start trying to take control from the bears, by gradually accumulating long positions.

Cup and Handle Pattern Psychology

As they build up their positions, we start to see a wide U-shape bottom (the cup), where bulls and bears are almost balanced. This suggests that the bears are no longer in control, and the downtrend has been neutralized.

In the final stage, where the handle forms, this is where the final battle of the bulls and bears take place.

By this time, the bulls have the upper hand as they have been accumulating positions during the cup formation, which in turn attracts more buyers.

Once the last bears are killed, bulls take full control, and the explosive price breakout takes place.

 

Cup and Handle Pattern Trading Strategies

There are 2 main strategies, which focus on the final battle between the bull and bears, because that is usually the tipping point where large explosive moves happen once the bears give up and get overwhelmed by the bulls.

  1. Pre-Breakout Entry: Enter before the breakout
  2. Pullback Entry: Wait for a pullback after the breakout

Cup and Handle Pattern Trading Strategies

Since the cup and handle is inherently a bullish pattern, the basic idea is to look for low risk buying opportunities to enter.

Looking at the diagram above, you might think that the best place to enter a trade is during the cup phase, because you can get the best entry price.

However, during the cup phase, the odds are 50-50, and there is no real edge, because the market is still sideways at that point of time.

In addition, the cup phase might last a really long time, and may not lead to a handle.

Hence, it makes more sense to make good use of your trading capital, and only enter the trade as the action is about to start.

The first opportunity would be to enter during the handle phase before the breakout, but if you miss that, they next best chance is to enter on the first pullback after the breakout.

Now, let’s go through each strategy in greater detail.

 

Trading Strategy #1: Pre-Breakout Entry

Our first strategy for the cup and handle price pattern is to enter just before the completion of the pattern, during the handle formation.

Cup and Handle Pattern Trading Strategies 1

During the cup formation, buyers would have been accumulating long positions and building bullish pressure, with the occasional test of the resistance level by trying to break out.

As the handle forms, it is very close to the breakout happening, and this provides a good low-risk opportunity to enter the trade just before the action begins.

Once the breakout happens, the price and volume is expected to surge, which would make it more challenging to enter a position, hence it is recommend to take a position before that.

For trading, we would look to enter during the handle formation, which would be very close to the resistance level.

We can then place a stoploss below the handle, and since the handle is usually pretty small relative to the pattern, the risk will not be very high.

 

Trading Strategy #2: Pullback Entry

Our next strategy for the cup and handle pattern is to enter on the first pullback after the initial breakout.

Cup and Handle Pattern Trading Strategies 2

As covered in the previous setup, one of the ways to trade the cup and handle pattern is to enter just before the price breaks out of pattern.

However, sometimes the breakout might be too fast, or you might have missed the breakout opportunity.

After such a long build-up (the cup and also the handle), it is very likely that any resulting move up would have more than 1 leg, so the first pullback/pause is a good place to enter because there is a high chance of a 2nd leg after the trend resumes.

In the example above, we see prices surge after the initial breakout, followed by a small pause which looks like a bull flag, before prices continue to surge again after breaking out from the flag pattern.

That small pause (in this case the bull flag) gives us a good low risk opportunity to get into the trade to ride the next wave of uptrend. Do note that the pause may not always be a flag, sometimes it might take other forms, but the idea is the same.

For trading, we would look to enter during the pause (formation of the small flag), when the risk and volatility is low.  The bottom of the pullback pattern would be a good place to put your stoploss.

If you have already taken a position using Strategy #1 on the pre-breakout, you can also use Strategy #2 to add more positions on the first pullback.

 

Profit Target for the Cup and Handle Pattern

Once the cup and handle pattern is identified, you can use the completed pattern to do a price projection, which can serve as a good estimate for a target profit for your trade.

To measure the target price, take the maximum height of the cup, and project that distance from the breakout point.

Profit Target for the Cup and Handle Pattern

In the chart above, the maximum height of the cup is indicated by the blue rectangular box, which is then used as a price projection at the breakout point.

The black horizontal arrow indicates the price level which serves as the minimum profit target for the cup and handle pattern breakout.

To get an added layer of confirmation, you can look for confluence with with tools and methods, such as support and resistance levels.

 

Tips from the Trading Desk

  1. For cup and handle continuation, look to trade with the trend, especially if the trend is strong.
  2. For cup and handle reversal, look for a strong accumulation base to build the move.
  3. Look for multiple attempts to break the resistance, but also avoid the false breakouts!

Tips from the Trading Desk

As you can see from the chart above, a key component of the cup and handle pattern lies in the resistance level, because in a sense the whole build-up during the cup and the battle during the handle is an attempt to break though this level.

Hence during the build-up phase, we should look out for attempts to break the resistance levels, and it is expected that the first few attempts will fail, so do not try to trade those breakouts.

These “false breakout” attempts are more to probe for weaknesses, and the chances of a successful breakout at this point of time is low because there is insufficient build-up, which usually takes the form of the handle.

Hence, it is more prudent to only enter this setup during the handle formation, especially if previous attempts have been made to break the resistance.

Now that I have shared the various trading strategies for the cup and handle price pattern, which is your favourite strategy?

Let me know in the comments below.

 

thumbnail the definitive guide to trading price chart patterns

If you would like to learn all the different price chart patterns, also check out: “The Definitive Guide to Trading Price Chart Patterns”

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Spencer Li

Book Summary: Die with Zero (How to Maximise Your Life)

Die with Zero Summary

Die With Zero: The Book That Made Me Rethink Money, Time, and Why I Stopped Chasing More

Last updated: 3 July 2026 · By Spencer Li, CFTe

“Die with Zero” by Bill Perkins argues that the goal of money is not to accumulate as much as possible, but to convert it into life experiences before you run out of time to enjoy them. The core idea: if you die with a large pile of unspent money, you sacrificed hours of your life earning money you never used, which means you effectively wasted those hours. The book flips the usual retirement advice. Instead of hoarding a big sum to live off the interest and dying with the capital intact, Perkins says you should aim to spend down to (close to) zero, peak your net worth earlier in life, give your money away while you are alive, and time each experience for the age when you can actually enjoy it. I read it recently, and it put words to something I had already been living. Here is what it actually says, and why it changed how I think about working harder.

How much time should you exchange for money?

Perkins starts with a simple reframe: money is stored life energy.

Life energy is all the hours you are alive to do things. Whenever you work, you spend some of that finite life energy. So any amount of money you have earned represents the life energy you spent earning it.

Follow that logic and something uncomfortable falls out. If you die with extra money, you sacrificed hours of your life for money you never spent. You wasted those hours.

That means there is an optimal amount of work, enough to fund the lifestyle you actually want, and anything beyond that is unnecessary. But most people work and save far past that point, usually out of fear or habit.

Perkins is blunt about why. Our culture’s focus on work is like a seductive drug. It takes all your yearning for discovery and wonder and experiences, and promises to give you the means (money) to get those things. Then the focus on the work and the money becomes so single-minded that you forget what you were yearning for in the first place. The poison becomes the medicine.

Once you are in the habit of working for money to live, the thrill of making money quietly exceeds the thrill of actually living. That is the trap.

What should you spend money on for maximum value?

Spend on experiences, not things.

Many psychological studies have shown that spending money on experiences makes us happier than spending it on material possessions. Things feel exciting at first, then depreciate. Experiences do the opposite. They gain value over time, because they pay what Perkins calls a memory dividend (the ongoing happiness you get from recalling and re-sharing an experience long after it happened).

The frame underneath this: your life is the sum of your experiences. Everything you do, the daily, weekly, annual, and once-in-a-lifetime experiences, adds up to who you are.

So the practical move is to actively think about the life experiences you want and how many times you want to have them. They can be large or small, free or costly. The point is to decide deliberately rather than drift.

Three questions Perkins keeps asking, which are worth sitting with:

  • What is the best way to spend our money for maximum enjoyment and maximum memories?
  • What is the best way to allocate our life energy before we die?
  • What are the life experiences you would like to have in this lifetime?

What are the biggest regrets people have at the end of life?

The biggest deathbed regret is wishing you had lived a life true to yourself, not the life others expected of you. Perkins draws on the five most common regrets recorded by people near the end of life, and almost all of them are about experiences not had and feelings not expressed, not about money not earned.

#The regretWhat it is really about
1I wish I’d had the courage to live a life true to myself, not the life others expected of meOther people’s script over your own
2I wish I hadn’t worked so hardOver-working past the optimal point
3I wish I’d had the courage to express my feelingsWithheld emotion
4I wish I had stayed in touch with my friendsNeglected relationships
5I wish that I had let myself be happierDelayed permission to enjoy life

Notice what is missing from that list: nobody wishes they had earned more.

And here is the part most people miss. This regret does not only strike once, at the very end. It strikes at every stage of life. The bookworm teenager who skipped the fun of high school for a supposedly brighter future. The middle-aged dad who kept skipping irreplaceable moments with his teens while chasing one more promotion.

Perkins calls these mini-deaths. The teenager in you dies. The college student in you dies. The single unattached version of you dies. The parent-of-an-infant version of you dies. Once each of those passes, there is no going back. You can delay some experiences for only so long before the window shuts forever.

When the end is near, people suddenly think, “What the hell am I doing? Why did I wait this long?” Until then, most of us live as if we had all the time in the world.

Why does timing matter as much as the money?

Because some experiences can only be enjoyed at a certain age, and your ability to enjoy them declines.

There is a sweet spot in everyone’s lifetime when they can most enjoy the fruits of their wealth. The problem is that people keep saving well past that point. That is the senselessness of indefinitely delayed gratification.

When you are young, Perkins argues you should focus more on building good experiences than on earning money, because your earning power will rise over time anyway. Your dollar earned per unit of time goes up as you get older, so the cheapest time (in life-energy terms) to buy experiences is when you are young.

The constraint shifts with age, and the research bears it out. People asked what stopped them from taking a trip gave different answers by age group:

Age groupWhat constrains them most
Under 60Time and money
75 and olderHealth problems

That is the whole argument in one table. When you are young you have health but not money. When you are old you have money but not health. Dying with zero is not only about money. It is about time. Start thinking about how you use your limited time, your life energy, and you are well on your way to living the fullest life you can.

What are “time buckets” and how are they different from a bucket list?

A bucket list is a flat list of things to do before you die. Time buckets are the same idea, but sorted into the life decades when each experience can actually be enjoyed.

The reason this matters: your declining health and narrowing interests mean your list of doable activities shrinks as you age. So your spending rate should not stay constant. If you want to die with zero and make the most of whatever health you have at each point, you will need to spend more in your fifties than your sixties, and more in your sixties than your seventies, let alone your eighties and nineties.

Perkins makes the trade-off vivid. Many people will spend tens or hundreds of thousands of dollars to prolong life by a few weeks. That is money they gave up years, even decades, of healthy and vibrant life to earn, traded for a few extra weeks when they are sick and immobile. The key is to strike the balance between spending on the present (on what you actually value) and saving smartly for the future.

How do you actually plan to die with zero?

It is simpler than it sounds. Estimate the maximum age you might live to, then work out how much cash you will need to get there.

Do note that your expenses (except medical) will be much lower as you age. They can be covered with a combination of annuities, insurance, savings, plus a buffer. And for nearly anything you might worry about in your future, there is an insurance product designed to protect against it.

The result of this approach: your net worth should peak earlier, in your 50s or 60s, instead of peaking on the day you die. Which means you can retire earlier, because you do not need to hoard as much.

Why give your money away while you are still alive?

Because giving it after you die leaves the timing, the amount, and even the recipient to chance.

Most people wait until they pass away to give wealth to their kids or to charity. But why not give it to your children when they can make the most of it?

Perkins ran an informal Twitter poll asking people the ideal age to receive an inheritance windfall. Of more than 3,500 voters, the answers were telling:

Ideal age to inheritShare of votes
18 to 2512%
26 to 35More than half (the clear winner)
36 to 4529%
46 or older6%

Why does 26 to 35 win? Some pointed to the time value of money and compound interest: the earlier you get it, the more it can grow. Others pointed to the immaturity problem of getting it too young. Perkins adds a third factor, health: you always get more value out of money before your health declines. The 26-to-35 range combines all three. Old enough to be trusted with money, young enough to fully enjoy it.

The alternative, waiting until you die, is what Perkins calls the three Rs: giving random amounts of money, at a random time, to random people (because who knows which of your heirs will still be alive when you go?).

What do you actually want to give your kids?

Memories, not just money.

Just as you are trying to form memories of time with your kids, it makes sense to want them to form memories of you. Both sets of memories pay a memory dividend, one stream for you and one for them. So the real question is: how do you want your kids to remember you?

Your kids only have their childhood for a certain number of years. What experiences do you want to have with them, or rather, what experiences do you want them to have with you? Does each extra hour of work really serve your legacy, or quietly deplete it?

My views: why am I not working harder?

I get this question often. People wonder why I am not working harder, trading more, scaling the business, making more money.

My question back to them is, “what is the point of making more money?”

I have more than enough money to create the experiences I want, to give to the people and charities I support, and to retire and die with zero.

So I choose to spend my time doing the things I enjoy. Playing sports. Hanging out with my friends and family. Reading (2000+ books and counting). Travelling around the world (70+ countries to date).

I probably will start a family at some point, which is why I have travelled to the more challenging places first, and left the family-friendly places for later. That is time-bucketing in practice.

And I look forward to creating more memories and experiences across the next two-thirds of my life.

Personally, the book did not convert me so much as confirm a bet I had already made. Money is the easy part to grow. Time is the part you cannot earn back.

FAQ

What is the main idea of “Die with Zero” by Bill Perkins?
The main idea is to convert your money into life experiences before you run out of time and health to enjoy them, rather than dying with a large unspent pile. Money you never spend represents wasted hours of your life energy.

Does “die with zero” mean spending all your money recklessly?
No. It means planning so your net worth peaks in your 50s or 60s and is drawn down deliberately over your remaining years, using annuities, insurance, savings, and a buffer to cover later-life expenses. It is intentional spending, not reckless spending.

What is the “memory dividend”?
The memory dividend is the ongoing happiness you keep getting from recalling and re-sharing a past experience. Unlike material things that depreciate, experiences gain value over time because you draw on the memory again and again.

What is the best age to give your children their inheritance?
In Perkins’ poll of 3,500+ people, the clear winner was ages 26 to 35: old enough to be trusted with money, young enough to enjoy it and let it compound. Giving while you are alive also lets you control the amount, timing, and recipient instead of leaving it to chance.

What are time buckets in “Die with Zero”?
Time buckets are your bucket list sorted into the decades of life when each experience can actually be enjoyed, since health and interests narrow with age. They help you schedule experiences for the right age rather than indefinitely postponing them.

If this resonated, the next book worth your time is Morgan Housel’s “The Psychology of Money,” which sits right next to this one on the same shelf. And if you want my full reading list, see the pillar below.

For more book summaries and recommendations, read the pillar: Best Investing and Trading Books of All Time.

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe) with 15+ years of trading across stocks, forex, crypto, commodities, and bonds. His trade log is public: every trade since April 2024, dated, losses left in. He has taught a 15-minute daily trading routine since 2014, one system for any market. He has also read 2000+ books and travelled to 70+ countries.

Education, not financial advice. Synapse Trading is not licensed by MAS to advise on investment products. Trading carries risk of loss; past performance is not indicative of future results.

Related

Best Investing and Trading Books of All Time (pillar) · The Psychology of Money (book summary) · How I Retired Early Through Trading

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Spencer Li

How to Pick the Market Bottom (As Well As Market Tops)

how to pick the market bottom

There is a common fallacy amongst many investors that because you cannot time the exact market tops and market bottoms in the stock market, therefore you cannot time the market at all, and market timing should be avoided.

This is simply not true.

While it is impossible to buy at the exact market bottom and sell at the exact market top, it is definitely possible to time your entries and exits to minimise your risk and maximise your returns.

A wise trader once told me that if you want to time the market, you must be willing to give up the top 1/8 and the bottom 1/8 of any move.

This means that instead of trying to capture the precise turning points in the market, we should focus on capturing the remaining 75% of the move, which forms the meat of every trend.

This is true not just for the stock market, but also very relevant to any market, like forex, commodities, etc. It also works on any timeframe, such as swing trading, intraday trading, position-trading, etc.

In this video, I share 2 simple strategies that a new investor or trader can use to pick tops and bottoms easily.

The first method has to do with scaling in, which is similar to dollar-cost averaging.

By studying how much stock markets usually decline (30-60% during corrections, you can allocate your capital to buy in at certain fixed points, such as the 30% mark, the 40% mark, the 50% mark, etc.

This allows you a low-risk way to buy in near the bottom, and the best part is that you do not even need any knowledge about how to read charts or how to analyse price trends.

The second method requires a bit more skill, as you will need to be familiar with technical analysis and reversal chart patterns.

By identifying bearish reversal chart patterns (such as the double top at the 2008 top), as well as bullish reversal chart patterns (such as the inverse head and shoulders pattern at the 2009 bottom), you will be able to time your trade near the top and bottom of every major move.

Enjoy the video, and remember to “like” and “subscribe”!

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Spencer Li

How to Trade the News (Especially When There is Too Much Market News)

how to deal with too much market news

Quite often, when we dive into the financial market, we find that there is simply too much market news. When we try to trade the news, we have no idea what is important or trivial, because we are so overloaded with information. This makes news trading quite an impossible task.

To make matters worse, we often get conflicting views from experts, with some being bullish all the time, while others are bearish all the time. And because some of them have pretty convincing arguments, we easily get swayed and our own opinions tend to fluctuate from extremely bullish to extremely bearish.

So what is the way around this?

The first thing you need to know as a trade relying on market news is to be able to differentiate between FACTS and OPINIONS.

Facts are like raw data, statistics, research from credible sources, economic data, etc. These are usually unbiased and come without opinions, and provide the basis for you to form your opinion.

Opinions, on the other hand, are views formed based on the analysis of facts/data, so there is inherent bias, and the conclusions drawn from the data may or may not be correct. Hence as a trader or investor, we need to zoom in on a handful of credible sources of good analysis.

The second thing you need to know when doing news trading is to “trade what you SEE, not what you THINK”.

Opinions often give you preconceived notions or views on the market, for example you might think that the market is bullish, and hence it should go up. However, in reality, the market may not move according to your opinion.

The only reality in the market is what we see on the charts, which is the price action of the market.

No matter how bullish you think the market is, the truth is that you will not be able to make money unless the price actually moves up. So when it comes to trading, your strategies, setups and analysis of the chart should take precedence over your opinions.

And that will help you filter out all the unnecessary noise in the market to zoom in on the best trading opportunities.

Enjoy the video, and remember to “like” and “subscribe”!

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Spencer Li

Market Crash: Is it Better to Sell Everything or Hold On? (For Your Long-Term Investment Portfolio)

market crash hold or sell

Recently in this stock market crash I have been getting this question a lot, and I think it applies not just to this market crash, but to all large market corrections in general.

So, is it better to sell everything in your investment portfolio, or to hold on till the market recovers?

In this video, I share my thought process on how I make my investment decisions for my long-term investment portfolio, and I offer you two important pieces of advice which you can use to strategize your own investment portfolio.

In deciding whether to cash out, you need to determine if you are using an active or passive investing strategy.

If your portfolio strategy is passive investing like dollar-cost averaging, or annual rebalancing of an all-weather portfolio, then whether the market is up or down should not have an impact on your strategy, and there is no reason to change your portfolio strategy and panic sell just because there is a market crash.

If your investing strategy is more active, such as value investing, or asset rotation, and you are good at it, then by all means follow your strategy of rotating your assets into safe haven products like cash or bonds.

The problem that most people face is that they do not have a portfolio strategy in the first place. And if this is the case, then should you hold on to what you have, or sell it in case it goes lower?

In the past 50 years, the market has only corrected 30% or more about 5 times, and only 50% or more about twice. So we need to think about this in terms of a trade-off between upside vs. downside potential.

If the market has already corrected 30%, and you did not manage to liquidate your portfolio earlier, at this very point in time, how much lower can it go? Another 20-30% more?

But if you sell off and it recovers to the previous highs before you can buy back in, the gains you will miss out are 40-50%.

So you need to decide if the downside risks you are avoiding is worth the potential gains that you could miss out on.

Another major consideration is whether you are currently adding to your portfolio (cash inflow), or drawing out from your portfolio (cash outflow). This will determine how aggressive your portfolio strategy is, and I will talk more about it in the video.

Enjoy the video, and remember to “like” and “subscribe”!

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