Forex Education

Bull Flag Price Action Trading Guide

Bull Flag Pattern

Any and all information discussed is for educational and informational purposes only and should not be considered tax, legal or investment advice. A referral to a stock or commodity is not an indication to buy or sell that stock or commodity.

  • But the bull flag pattern is one of the more reliable and effective trading patterns.
  • Also, traders can ascertain the bull flag profit target by calculating the price distance between the base of the flagpole and the flag’s highest point.
  • Bull flags can also occur on higher time frames like daily charts.
  • For instance, now you need to look for swing lows in the pullback up instead of swing highs.
  • This pattern starts with a strong almost vertical price spike that takes the short-sellers completely off-guard as they cover in frenzy as more buyers come in off the fence.
  • Thebull flagpattern is a continuation chart pattern that facilitates an extension of the uptrend.

This is a particular case of the bull flag in which the line along the top of the bull flag slopes up. The projected target from a bull flag serves only as a reference. You could place a stop-loss at the most recent swing low as marked out by the dotted line.

Step 1: Identify the Pattern

The first entry is an early entry that allows the trader to capitalize on an initial move back to the high of the flagpole before the stock rejects or breaks out. Imagen that you are standing at ground level and looking at a rectangular flag on a pole that rises to the sky. This visual is what you see on a stock chart when price rises . This resistance level then becomes a support level and moves higher in an up trending manner. It may seem that one can identify flag chart patterns without breaking a sweat, but they are actually quite tricky.

Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. The bull flag strategy in this tutorial is similar to Al Brook’s two-legged pullback approach. However, here, instead of counting the number of legs, we focused on the breakout of the counter-trendline. Different traders might identify the flag pole differently. With this swing high, we drew a counter-trendline to outline the top of the bull flag.

Bull flag and bear flag patterns summed up

Within that range, a bull flag begins to form mid-day, right at the middle of the trading range. What is the difference between a bull flag and a bear flag? The bear flag is a countertrend consolidation in a downtrend. The bull flag is a countertrend consolidation in an uptrend.

It is important to set a stop-loss order when trading based on the Bull Flag Pattern. This will protect against potential losses if the price does not move in the expected direction.

Bull flag candle pattern

Using the volume indicator, traders verify the bull flag signal following the price of a cryptocurrency of their choice . Then, on the price chart, crypto traders use the volume indicator and predict that trading volume will decline during the price correction. This article will discuss what a bull flag chart pattern tells you, how to read and spot it, and the differences between a bull vs. bear flag chart pattern. Many security price forecasters use technical analysis, sometimes referred to as charting. However, they opt to reject the efficient markets hypothesis altogether. The efficient markets hypothesis , also called the Random Walk Theory, is the idea that current securities prices accurately reflect the information about the firm’s value.

How to trade using the bull flag?

Trading using the bull flag pattern is not difficult – we know that this is a trend continuation pattern. First you need to draw the pattern in the chart, then find the optimal entry point and set a stop loss.

Similarly, you want to make sure you are trading off of the correct time frame for the context of the move. Nonetheless, for a pennant pattern to be bullish, you want it to have similar characteristics to a bull flag with regard to volume. The only real difference is that the pattern will be creating higher lows and lower highs into the apex. For example, the best bull flags occur at the start of a new uptrend.

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