# Cup and Handle and Rectangle Patterns Explained

> The cup and handle is a classic bullish continuation, and the rectangle is the simplest range pattern. Learn how to recognise both, trade the breakout and manage risk.

Canonical: https://learnertrades.com/article/cup-and-handle-and-rectangle-patterns-guide
Published: 2026-09-10

Two patterns that sit at opposite ends of the complexity scale: one is a slow, rounded base that ends in a breakout, the other is a plain range.

## Cup and handle (bullish continuation)

{{diagram:cup-and-handle}}

**Structure:**

1. **The cup:** price rounds down from a high and rounds back up to roughly the same level, forming a U shape.
2. **The handle:** a small, shallow pullback just under the rim as the last sellers exit.
3. **The breakout:** a close above the rim (resistance) resumes the uptrend.

**Trade plan:**

- **Entry:** a close above the rim, or a retest of the rim as support.
- **Stop:** below the handle low.
- **Target:** project the depth of the cup above the breakout.

**Quality checks:** the cup should be rounded (a sharp V is not a cup), the handle should be shallow and short, and volume typically dries up in the handle and expands on the breakout.

## Rectangle (range)

{{diagram:rectangle}}

Price moves sideways between a flat support and a flat resistance. Buyers and sellers are in balance.

**Two ways to trade it:**

1. **Range trading:** buy near support and sell near resistance, with stops just outside the range. It works while the range holds, so keep the position small and use a firm stop.
2. **Breakout trading:** wait for a closing break beyond either side and project the range height as the target.

## Common mistakes

- Calling any dip a "cup" without a rounded shape and clear rim.
- Entering inside the handle before the rim breaks.
- Range trading right after a breakout has started.
- Placing stops exactly at the range boundary rather than a little outside.

## Key takeaways

- Cup and handle: rounded base, shallow handle, breakout above the rim.
- Rectangle: flat support and resistance, trade the bounces or the break.
- Always define the stop first. Educational only, not financial advice.

## Related guides

- [Bull and bear flag patterns](/article/bull-flag-and-bear-flag-patterns-guide)
- [Chart patterns cheat sheet](/article/chart-patterns-cheat-sheet-reversal-vs-continuation)
- [Support, resistance and liquidity](/article/support-resistance-and-liquidity-where-price-actually-reacts)
- [How to write a trade plan](/article/the-complete-trade-plan-structure-from-idea-to-journal)

**How deep should the cup be?**
The cup should be a rounded base, not a sharp V. The handle should be a shallow pullback, typically in the upper half of the cup's height.

**Can you trade a rectangle inside the range?**
Yes. Many traders buy near support and sell near resistance with stops just outside the range, then switch to a breakout plan when price closes decisively outside it.

**Does a cup and handle work in forex?**
The structure appears in all markets, including forex, gold and crypto. It is more common on higher timeframes.