Bull Flag and Bear Flag Chart Patterns Explained

A bull flag pattern is a sharp, strong volume rally of an asset or stock that portrays a positive development. It forms when the price retraces by going sideways to lower price action on weaker volume followed by a sharp rally to new highs on strong volume.

It will frame an easy trading strategy for you to skim the markets. In this article, we will discuss what the bear flag chart pattern looks like, how to identify it, and what trading strategies you can use when trading it. Together these charts illustrate the favourable volume patterns traders will be looking to identify into a bull flag, which assumes continued price gains to follow. Traders of a bear flag might wait for the price to break below the support of the consolidation to find short entry into the market.

What do Flag Patterns Indicate

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The trend lines should maintain a parallel distance between each other until the price collapsed back under the lower trend line. This triggers longs to unload their positions as panic sets in when the price falls through the lowest low. This triggers the bear flag breakdown and subsequent resumption of the next leg of the prior https://www.bigshotrading.info/ downtrend as prices make new lows. Bull Flags are a subset of our momentum trading strategy and can be used on any time frame. We like trading bull flags on the 2 and 5-minute time frames as a way to scalp short-term price movements. A bull flag pattern is a chart pattern that occurs when a stock is in a strong uptrend.

How to Trade Forex Using the Bear Flag Pattern – Strategies and Examples

The bear flag pattern was confirmed as the lower trend line was broken to the downside. #DOT/USDT $DOT is trading inside ascending channel, and now price is near and above lower line of this zone. If you’re looking for free scanners to find bull flag patterns you can check out Finviz or Chartmill. With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members.

• This triggers longs to unload their positions as panic sets in when the price falls through the lowest low.
• Place a sell order beneath the lower trend line of the flag.
• What separates the flag from a typical breakout or breakdown is the pole formation representing almost a vertical and parabolic initial price move.
• With most bull flag patterns, the volume increases when the pole is being formed, then drops during the period of consolidation.
• With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations.

A continuation pattern, like the bearish flag, brings some good news because it tells you after the market has gone down, that it will continue to go down even more. Investors who’d rather avoid risky trades will have limited opportunities to make a huge profit when using this chart pattern. Bear Flag Pattern After the sell-off, the price will enter into a period of consolidation. This is typically marked by lowervolumeand tighter trading range. Volume patterns may often be used in conjunction with flag patterns, with the aim of further validating these formations and their assumed outcomes.

Setting targets when trading a Bear or Bull flag

Using the distance we calculated above for the flag pole, we now have a measured objective for a possible target. Before setting up the targets, it’s important to determine where we are in the price move or trend. Ross Cameron’s experience with trading is not typical, nor is the experience of traders featured in testimonials. Becoming an experienced trader takes hard work, dedication and a significant amount of time.