An ascending triangle occurs when the price forms a horizontal resistance line, while creating higher lows. This pattern suggests when is a bull flag invalidated increasing buying pressure, and a breakout above the resistance line often represents a continuation of the prior uptrend. On the other hand, in a descending triangle, the price forms a horizontal support line while creating lower highs. A breakdown below the support line is often seen as a continuation of the previous downtrend.

1. Whether relying on chart patterns, technical indicators, or a combination of both, it is essential to adapt strategies to individual trading styles and time horizons.
2. This pattern is formed when the price consolidates between a horizontal resistance level and a rising trendline.
3. Do not trade this strategy during or prior to big market news events.
4. The reversal can bring the price back into the bull flag range or mark the beginning of a more bearish downward trend.
5. All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns.
6. During this uptrend, the price forms an ascending triangle pattern, with a horizontal resistance level and a rising trendline.
7. Pattern confirmation occurs when the price breaks below the lower flag boundary, signaling a potential downtrend continuation.

The rule can be changed if the flagpole is too long for the timeframe you trade in. As the trend can’t exist indefinitely, a reversal will occur anyway. The larger the flagpole, the more likely the price will reverse before reaching the target.

Trade major, minor and exotic pairs with excellent trading conditions.

Instead, buying at the upper side means that bulls are usually in control. As we have written before, there are many answers to this question. We can see that we have a good profit target of approximately 262 pips and if we measure the same amount from the breakout point and project it to the upside we get our profit target. We have got a really solid looking setup 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. In this case, we want to enter when we break above the upper flag “border” or above the top of the flag pole.

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The flag pattern occurs when a trending price pauses and goes back over slightly in a rectangular range. Trading with the market is aimed at minimizing risks and making a buy trade at a better price during the breakout of the resistance line. As we mentioned above, you want a bull flag to put in a series of lower highs so that you can buy the breakout of the most recent candle's lower high. Bull flags can also occur on higher time frames like daily charts.

This sharp upward movement reflects intense buying interest and establishes a bullish trend. A Bull Flag pattern is a bullish continuation pattern that signals a pause in an uptrend followed by a breakout. The flag portion of the pattern is typically a rectangle or a parallel channel, and the volume during the flag tends to be lower than during the flagpole. When the price breaks out of the flag, it is usually accompanied by a high trading volume, indicating that the bullish momentum has resumed.

Bear Flag Pattern: Overview, How To Trade, Set Price Targets and Examples

1. For instance, suppose the CNY/JPY currency pair has been experiencing a strong uptrend, marked by a significant upward move.
2. For a retest horizontal break strategy, initiate a trade when the price revisits the area just above the flag pattern’s upper horizontal boundary after an initial breakout.
3. Identifying a flag pattern helps traders anticipate the resumption of the prior trend, providing strategic entry points for trades.
4. This article represents the opinion of the Companies operating under the FXOpen brand only.
5. Then, during the flag formation, we get the pullback on lower volume and tighter range red candles.
6. The most popular are low-probability trades and high-probability entries using Smart Money Concepts.
7. The symmetrical triangle pattern is another continuation pattern frequently observed in CNY forex trading.

This pattern indicates that the initial bullish momentum will likely continue after a brief consolidation period. Understanding this pattern can greatly enhance your ability to identify profitable trading opportunities. The aim of this article was to study in detail the flag patterns, their main advantages and disadvantages. In addition, we looked at the differences between the bull flag and the bearish flag. To open a position, you need the breakout to be confirmed and the price to consolidate higher. After opening a position, set a stop loss below the formed flag pattern.

In the 1-hour GBPUSD chart, a rectangular bull flag pattern forms during the consolidation phase. This pattern appears as a rectangle and indicates price movements within a specific range, bound by parallel support and resistance levels. A bull flag is a chart pattern used by technical traders to signal when the market is likely to rally further. This pattern usually appears when prices undergo a short-term corrective phase within a broader uptrend, indicating that the asset is likely to experience a further rise in price. The pattern unfolds in specific phases, starting with a significant upward surge caused by a strong influx of buying pressure.

The bear flag indicates bearish momentum, anticipating the downtrend’s prolongation. The psychology of a bull flag pattern is rooted in market participants' behavior with a strong surge in buying activity creating the flagpole, reflecting optimism and confidence in the asset. As prices reaches higher levels, traders decide to take profits, resulting in a consolidation or price retracement. This profit-taking phase introduces an element of caution and a desire to secure gains among market participants. However, the overall sentiment remains positive, with traders viewing the consolidation as a temporary price pause rather than a shift in trend.

Entering at this point helps you join the uptrend at the beginning of the next leg higher. For example, recognizing a bullish flag setup can allow one to enter a long position anticipating a breakout. While both patterns share similarities in structure—a flagpole followed by a flag—they signal opposite market trends.

However, this method is prone to false moves (Market Maker Traps), which usually get most traders off-guard with what we call stop hunts. In a Bullish Flag scenario, this could either be at a break above the last high of the flag (E) or above the high created by the flag pole (B). Also, the stop loss is below the last low of the flag (Example 2 C). First, let’s discuss what these two patterns are and what they indicate in the world of trading.