The Flag as a Continuation Pattern

How to Identify and Exploit Sloping Flag Patterns for Profit

Trading Considerations.

About your Demo Account. A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk. Jan 03,  · Trading Flags and Pennants Patterns. Flags and pennants chart patterns are primarily known for signaling a continuation of the previous trend. The flag or pennant chart pattern is formed right after a bullish or bearish /5(13).

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Figure 2 above shows a bullish flag example. We notice how the price moved rapidly before entering a period of gradual exhaustion, shown by the number of candles within the flag. After breaking out of the flag pattern, price rallies to reach not only the minimum price objective but rallies to make higher highs. The stops for the bullish flag are placed just at the low prior to the break out from the bullish flag. A bearish flag is characterized by a sharp drop in price followed a period of gradual price congestion moving higher within a channel.

On break out of the bearish flag, price then travels a minimum distance of the flag post. The Figure 3 illustrates a typical bearish flag pattern. An interesting point to bear in mind in the above bearish flag trade example is the retest of the break out level. This retest may or may not happen, but it does remind traders that trading on a retest of a break out price level is always a safe option. However, this is not always as the case as in most cases with flags, the break it sharp and quick.

In the case of the above bearish flag break out, despite the rally back to retest the break out level, price did manage to reach the minimum price objective. Trading the Pennant Patterns. The pennant patterns are similar to flags, with the main difference being that the patterns are formed as converging trend lines into a triangle. The bullish and bearish pennant chart patterns work on the same principles of the flag patterns. The following chart shows a bearish pennant pattern.

As seen by the above chart, the bearish pennant pattern is identified by converging trend lines forming a pennant that is sloping upwards at the bottom end. The pattern is somewhat similar to a symmetrical triangle formed within a smaller number of candles, but preceded by a sharp bearish drop.

Figure 6 illustrates a bearish pennant example. When taken in view of the larger chart pattern, the bearish pennant, the fakeout could have been easily avoided. Price eventually manages to break lower out of the pennant pattern eventually retesting the break out before dropping to reach the price objective.

The bullish pennant pattern is the opposite of the bearish pennant pattern and almost similar to a bullish flag pattern, with the exception that the pennant is formed by converging trend lines forming a symmetrical triangle. The chart below, Figure 7, shows a bullish pennant example and how it can be traded. Figure 8 represents a trade example of a bullish pennant pattern. Here we can see after a rapid rally, prices started to consolidate within a tight range forming a pennant.

Upon break out from this pennant, price then subsequently rallied to reach the projected target. The Flag Trading Pattern is one of the easiest to help you build your trading skills. We have to answer to an important question: The bullish flag pattern is a powerful technical pattern that can develop from the lowest time frame possible 1-minute TF all the way up to the monthly chart. More, the bullish flag pattern is a universal pattern that can show up in all markets.

Not only that the bullish flag pattern is a very simple technical indicator, but it can lead to moves that are of the same magnitude as the flag pole movement. How to trade the bullish Flag pattern is as simple as the bullish flag pattern itself. Since this is a continuation pattern we want to trade in the direction of the prevailing trend. So, as the name suggests — bullish Flag pattern — we should expect a bullish move to come out of this pattern.

We also have training for building a foundation before a forex strategy matters. Zooming out your charts you will be able to spot the bullish flag pattern much faster. We recommend all the time to play with the charts and zoom out so you can better identify the bullish flag pattern. Following this step, it will also make it visually a little bit easier to plan your next move.

Most trading platforms come with a technical tool that can help you draw a parallel channel and highlight the flag pattern. On the TradingView platform, our preferred trading platform, the channel tool is located on the right hand-side panel: Next, we need to figure out where we need to get into the trade, which brings us to the next step of the best Flag pattern strategy.

We have got a really solid looking bullish flag pattern here that follows exactly the rules highlighted in the Bullish Flag Pattern Explained.

So, now we can safely enter at the immediate breakout above the flag.

Bearish Pennants

Always trade Flag and Pennants in the direction of the previous main trend: Pennants and Flags are short-term continuation patterns and are among the most reliable of all continuation patterns, they are formed when there is a sharp price movement followed by a consolidation phase sideways action , thereafter the previous up or down trend is expected to resume.

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Thanks for the clear explanation…even a newbie understands! As stated by Thomas Bulkowski in his book Encyclopedia of Chart Patterns , tight formations that neatly stay within the rising or horizontal channel.

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