Trading the trend – Two Cup and Handle entries

Breakouts are one of the best patterns a trend following trader can look for. Focusing on breakouts forces one to look for uptrending stocks where the price is breaking through a prior high. This has two benefits: firstly, downtrending stage four stocks are avoided, and secondly, uptrending stocks are usually uptrending for a reason. You might know what that reason is, but you don’t need to know and can still join for the ride. Nicolas Darvas, a trained economist turned full time touring dancer with his half-sister Julia, made over $2,000,000 in the stock market purely by using a simple system of what is now known as ‘Darvas boxes’. These were boxes drawn on by Darvas on a chart where the price broke through a resistance line – his system was a rudimentary breakout system and he would use volume as an indicator as a method of searching for insiders buying stocks. Indeed, if one looks back at the volume when takeovers are announced it’s not unusual for volumes to ramp up in the stock’s trading activities. Nicolas’s book is worth a read, as despite being across the other side of the globe, he still traded sending telegrams to his…