Bull Flag Chart Patterns The Complete Guide for Traders

A bull flag chart pattern is a continuation pattern that occurs in a strong uptrend. It signals that the prevailing vertical trend may be in the process of extending its range. Bull flags are the opposite of bear flags, which form amid a concerted downtrend.

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The pennant flag narrows to a point, eventually breaking to the high side. This flag is right at the top of the flagpole, and the following breakout is beautiful. When trading a bull flag I prefer to wait for confirmation that the flag is complete. They’re clean and easy to read — especially when it comes to the bull flag candlestick pattern. Last, you know it’s a bull flag when you see a breakout after the first spike and consolidation.

Flat top breakout pattern

The stock could give a false signal in the pennant or flag, and then fail to rally again. The support and resistance lines on a bull pennant flag resemble a cone or triangle. The support and resistance lines dip for the length of the flag before shooting up in a breakout through resistance. In this example you have AMC breaking out of its prior trading range on increased volume.

But, not only that, your profit potential is multiple return of your risk. In essence, you risk a little to gain a lot more which is the thing that most traders should strive for. I have just learnt from this lecture that the bull flag pattern can also used to trade trend reversal as well as rangt breakouts. Before, I only use it to juim into uptrends on GBP/JPY 4hr timeframe. Ryan Teo, for providing us daily lecture on trading and finance. Most times, after the Flag completes the two targets, you would want to close out the entire position and bank your profits.

In the current market, it’s more difficult to find great stocks to trade and execute your plan… Stocks are… The flagpole gave a target of under 60 cents, which would have been eventually reached at the end of the day as the stock slowly faded. Once we see the first large candle and the stock rise again, we can buy under $1.40, placing our stop loss below $1.30. We shift the first flagpole to the bottom of our flag to estimate the target. Many traders are convinced their trade has to work — they don’t include an exit in their trading plan. Sometimes a bull flag won’t work out as you want or expect.

Example #2: Bitcoin Swing Trading

Place stop loss below the bottom line (the distance of 3-10 pips depending on the timeframe is highly recommended). In the end, the price should break above the upper boundary of the pattern. The pattern can be applied to the Forex market, stock, cryptocurrencies, commodities, etc.

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This means that we set bull flag profit target 70 points from the point of a bullish pennant of the upper border of the consolidation. Thank you, If consolidation has continued for a long time, it may be worth considering a price channel pattern. Price channels can offer valuable information, but it’s important to monitor price action, adjust your trading plan, use other technical indicators and manage risk effectively. A flag pattern can be identified by looking for a sharp price movement, followed by a consolidation period in the form of a rectangular or flag shape. It is important to confirm the pattern with other technical analysis tools. When you’re able to tighten your stop loss at the levels the bullish flag pattern allows you to do you know you’re on the right path.

Benefits and Risks of a Bull Chart Pattern

There are some variations of the patterns like the flat top breakout and pennant and use intraday. The simple bull flag guidelines will give a wide range of continuation patterns. Hence, they provide plenty of opportunities for close analysis. The key to trading any pattern is to learn how to manage your risk. Bullish flag formations are found in stocks with strong uptrends and are considered good continuation patterns.

Learn how to spot a bull flag quickly in a trading chart. Plus, check out our tips on profiting from flag pattern trading in this comprehensive guide. Candlestick patterns do not always appear as perfect as expected. As a result, do not expect to see a well-formed flagpole followed by a consolidation that forms a smooth range and then a continuation.

It is a great way to get your feet wet and test your strategies without actually risking real money in Bitcoin. Add on a breakout to the high of the day if volume expands. When the resistance level is broken, open a buy trade. First, we wait for the formation of the first highs and lows. You can open buy trades when the upper limit of the descending channel is broken.

The psychology behind Bull Flag

The increasing or higher than usual https://g-markets.net/ accompanying the downtrend , suggests an increased sell side enthusiasm for the security in question. There are a few variations on the classic bull flag pattern. They all feature strong momentum followed by a consolidation period. But they’re different enough to have their own categories. Smart traders know key patterns — and the bull flag pattern can be a crucial momentum indicator.

When the bull flag trading strategy increases and completes the size of the Flag, you can close out 1/3 of your position size and book the profits. The confirmation of the Bullish Flag pattern happens with the upside breakout, and we would prepare for a long position. Then we apply the same target rules as discussed earlier. Support and Resistance rules are of a great importance too. If you see the price hitting a level, and then bouncing contrary to the trend, then the trend might be getting exhausted.

Finally, I suggest using a tight trailing stop loss such as the 20-period moving average. That’s why I suggest taking your profits below the next area of resistance you’ve plotted on the chart. Now recall, this strategy is a range breakout strategy. In this case, you want to use the 50-period moving average as your trailing stop loss. Therefore, you’d be using a 50-period moving average. But for the sake of consistency, master trading one type of trend first by having trades clocked in.

Certain price movements take on distinctive patterns which can help predict trends. And you may have heard of some of these popular trading terms, such as Fibonacci, death crosses, and various flag patterns. In this article, we hone in on one of the most bullish candlestick formations, aptly termed the bull flag pattern.

If you are using platforms such as TradingView, zoom out of the chart and mark the consolidation zone. I think it’s easier to see the flag pattern when you’re looking at a candlestick chart. The flagpole might look the same as it does on a line chart, but the flag portion can be more distinct.