How to Trade Bull Flag and Bear Flag Pattern

indicators and fundamental
bullish flag

The Bullish Flag Pattern is a trend continuation chart pattern. A bull flag pattern is a chart pattern that occurs when a stock is in a sharp strong uptrend. It is called a flag pattern because when you see it on a chart it looks like a flag on a pole and since we are in an uptrend it is considered a bullish flag. Ignoring the market context is another mistake that traders often make. It is essential to consider the overall market conditions and the presence of other technical indicators to confirm the trend’s direction. Trading solely based on a bear flag pattern without considering other factors can lead to incorrect trading decisions.

Not all strong moves followed by consolidation or what appears to be Reaccumulation or Redistribution will result in successful Bull or Bear Flags. Once you have taken all these factors into consideration, we can determine the target. Before the price continues in its direction to the next liquidity zone. They give you the “Market Narrative” and help you forecast more accurately where and when to place your entry to get in. As their name indicates, they are “Patterns”, which means they are phenomena or the result of the price forming this shape that we call “Bear Flag” and “Bull Flag” Patterns. They are followed by the consolidation in price that is called “Flag“.

flag pattern

The flag pole is a sharp decline in price, and the pennant is a period of consolidation with converging trendlines. A bear flag chart is a pattern that appears when there is a significant price decline in an asset, followed by a period of consolidation, which can result in a continuation of the downtrend. In the bull flag patterns, for instance, the flag pole is formed first. Technical analysis chat patterns have many such nuances, but it’s really not as complicated as it seems at first glance. Trading in the cryptocurrency market can be an incredibly lucrative opportunity, but it’s also one of the most volatile.

How to use a bull flag in trading — best strategy

A bull flag is a bullish chart pattern formed by two rallies separated by a brief consolidating retracement period. The flagpole forms on an almost vertical price spike as sellers get blindsided… The measured move method is a common profit target strategy used by traders. It involves projecting the distance of the flag pole from the breakout point and adding it to the breakout point to determine the profit target. For example, if the flagpole’s distance is $10, and the breakout point is $50, the profit target would be $60 ($50 + $10). One strategy is to place the stop loss order above the flag’s upper trendline.

A bear flag pattern with low volume during the consolidation period may not be as reliable as one with high volume. Have you ever wondered why price action sometimes forms a bull flag pattern? Have you ever wondered if there is a way to predict whether a bull flag will break out before it actually does so? In this post, I will try to address these questions by presenting a couple of theories about the nature of bull flags.

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Variations of the bear flag pattern, such as bearish pennants and descending channels, can also provide additional trading opportunities. By avoiding these common mistakes, traders can make more informed decisions and avoid potential losses. It is essential to use a combination of technical analysis tools and fundamental analysis to confirm the trend’s direction before making any trades. Managing risk by setting stop-loss levels and taking profits at predetermined levels is also crucial for successful trading. Volume analysis is a crucial factor in determining the reliability of a bear flag pattern. Ignoring volume analysis can lead to entering a trade at the wrong time or missing out on a profitable trading opportunity.


Learn how to spot a flag quickly in a trading chart. Plus, check out our tips on profiting from flag pattern trading in this comprehensive guide. The take profit is measured by simply copy-pasting the flagpole from a point where the breakout took place.

Bull flag pattern + below resistance

However, what does “bear trap in trading” really mean? You will get answers to these and other questions in this article. One of the most convenient platforms for improving your trading skills is LiteFinance.

A bull flag resembles the letter F, just like the double top pattern looks like an “M” letter and a double bottom pattern – a Wletter. In general, the bear flag is considered to be a strong technical pattern. This is especially the case when the retracement ends at around 38.2%, creating a textbook bear flag pattern. Therefore, its greatest advantage is that it offers a very attractiverisk-reward ratio, as levels are clearly defined. As said earlier, the bear flag is a continuation pattern that facilitates the extension lower.

  • The second step is to locate the flagpole, which is the initial sharp decline in the asset’s price that forms the basis of the bear flag pattern.
  • Contracts for Difference are not available for US residents.
  • As the name itself suggests, a bull flag is a bullish pattern, unlike the bear flag that takes place in the middle of a downtrend.
  • There are special risks involved with trading on margin.
  • IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

Most importantly, the guidelines above are not definitive. Tweak them to form your system of identifying bull flag patterns. We use the same GBP/USD daily chart to share simple tips on trading bullish flags. The breakout occurs once the buyers reassume control of the price action after a temporary pause in the uptrend.

Double Bottom Chart Pattern: Meaning, Guide and Tips

The bull flag price pattern is a popular continuation pattern. Learn a set of guidelines to help you identify the ideal bull flags to join a rising market. There were various opportunities available both short term and long term. Once you can identify chart patterns, you can easily anticipate where price will go next.

Low volume during the consolidation period indicates a lack of interest from market participants, which can lead to a false breakout or breakdown. Thebull flagpattern is a continuation chart pattern that facilitates an extension of the uptrend. The price action consolidates within the two parallel trend lines in the opposite direction of the uptrend, before breaking out and continuing the uptrend. As the name itself suggests, a bull flag is a bullish pattern, unlike the bear flag that takes place in the middle of a downtrend. Remember that no matter how good you get at reading bull and bear flag patterns, there are times when the trade will just not work out.

How long do bull flags last?

Likewise, a pullback in a bear trend is a bear flag and it is a small bull trend, and that small bull trend can end with a double top. If it does, that double top is a double top bear flag. Traders should wait for the breakout to occur and then enter the trade, preferably with a stop-loss order to manage risk. It is essential to confirm the breakout with other technical indicators and fundamental analysis before entering the trade.

Traders use continuation patterns to identify potential entry and exit points and manage risk by setting stop-loss levels. The bear flag pattern is identified by its distinct shape, which resembles a flag on a pole, hence the name. Understanding and recognizing bear flag charts can be valuable for traders looking to enter or exit positions in the market. In this guide, we will explore the characteristics of bear flag charts and provide strategies for trading them effectively. Just like with any other chart pattern, the main objective of a bull flag is to allow traders the opportunity to profit from the market’s momentum. In this way, entry and exit points can be determined by studying the trajectory of the pattern’s trend.

bull flag formation flag vs Bear pennantThe bear flag and the bear pennant are chart patterns used to identify bear markets. They both appear as downward-sloping trends that are followed by a brief period of consolidation before the price continues its decline. Both patterns indicate bearish activity and can be used to anticipate potential reversals and prepare for short positions.

These formations are all similar and tend to show up in similar situations in an existing trend. Learning how to identify and use indicators helps grant a greater deal of certainty for both short- and long-term trades, especially when combined with fundamentals and basic technical analysis. They measure the length of the flagpole and use it to project a proportionate length within which their profit target should be. With the descriptions we have made, identifying the candlestick patterns is easy. The flags appear in an uptrend or a downtrend as a short period of consolidation followed by a breakout and then a continuation of the trend.

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Traders should consider their risk tolerance and the potential loss in case of a trade going against them when determining the position size. The instances in Example #1 are traditional bull flags. The first instance in Example #3 is more akin to a pennant.

Bull Flag Pattern FAQs

To summarize the patterns in general, they indicate a continuation of the prior trend, with the flag representing a pause or consolidation before the trend resumes. Buy when prices breakout above the consolidationpatternon high volume. After the strong move higher, the market becomes overbought so the market needs to take a “rest”. Here’s where you can expect a potential Bull Flag to form.

How to trade bull and bear flag patterns? – Cointelegraph

How to trade bull and bear flag patterns?.

Posted: Wed, 22 Feb 2023 08:00:00 GMT [source]

That would be a lower low, and they would be concerned that it might be followed by a lower high instead of a new high. If so, the market might be forming a two-legged correction , or even a trend reversal. Because of this, if the bulls have a lot of conviction in the trend, they will buy heavily … Another strategy is to place the stop loss order above the most recent swing high. This strategy assumes that if the price breaks above the most recent swing high, the bearish trend has ended, and the trade is no longer valid.

Welcoming you back (after 18-week break) Thanks for your like and supports. A breakout to the upside activates the pattern, while a break of the supporting line invalidates the formation. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. More precisely, the flag will tell us whether the consolidation phase is over as the sellers increase their pressure. The breakout provides us with precisely defined levels to play with, as you will see in the example below. Depending on the strength of a downtrend, the rebound may be sharper or milder.

In this case, the bullish trend will be represented by increased volume in the pole and decreased volume in the flag where the price consolidates. These are the specific characteristics to look for when spotting a bull flag pattern in a trading chart. The bearish flag is a candlestick chart pattern that signals the extension of the downtrend once the temporary pause is finished. As a continuation pattern, the bear flag helps sellers to push the price action further lower. Bull Flags and Bear Flags are continuation price chart patterns in technical analysis that allow traders to forecast the direction of the trend after the price has consolidated.

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