The larger the flagpole, the more likely the price will reverse before reaching the target. In this case, you may consider using trailing take-profit orders and close your trade partially. Traders enter the market after either the breakout candlestick or several candles in the breakout direction are closed. After the strong move higher, the market becomes overbought so the market needs to take a “rest”. A small break before the market continues moving in the same direction. A trading target from the breakout is often derived by measuring the height of the preceding trend (flagpole) and projecting a proportionate distance from the breakout level.

With most bear flag patterns, the volume increases when the pole is being formed, then remains at its new level. Volume typically does not decline during the consolidation period as downward trends are often a vicious cycle driven by investor fear over falling prices. As such, the volume is upwards as the remaining investors feel compelled to take action.

Bearish Flag Chart Pattern: FAQ

The flag is formed when the price consolidates after a sharp price increase. The trading strategy based on the Fibonacci levels suggests bull flag vs bear flag entering short positions on the price corrections. Like other chat patterns, the flag pattern has its unique key features.

The bullish flag formations can be recognized by a strong uptrend followed by a pause in the trend that has the shape of a flag. This sideway channel indicates the consolidation phase which means that the traders who bought stocks initially are now booking their profits. The answer is new buyers are still entering and sellers are not yet controlling the price. In day trading, the Bull Flag pattern is a fast execution trading strategy that works best on stocks with low float. Backtesting clearly shows it quite often on the chart when the stock is in a strong uptrend. 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.

Bull Flag vs Bear Flag Chart Patterns Elements

First, let’s examine the bigger picture trade idea in the simulator. Notice how on this 30-minute chart, AMC has been mostly range-bound for a few days, bouncing between support and resistance. As you can see from the image above, the context is everything when comparing a bull flag to a bear flag. That being said, they are both very similar and should be treated almost identically, just in different trending contexts. A bull flag means that there is a pause, albeit brief, in the upward momentum of a stock’s move to higher prices. It indicates that the stock might be in a temporary overbought condition, which will likely bring in some early selling pressure in a young bull run.

Similarly, you want to make sure you are trading off of the correct time frame for the context of the move. However, once the stock has had a chance to pull back and consolidate, the bull flag should produce a breakout, allowing the stock to resume its prior momentum. In other words, there are more traders willing to buy the flag than sell it.

How to Trade Bull Flag and Bear Flag Pattern in Trading

The bear flag is a signal of market consolidation that occurs within a downtrend. Visually, it appears as a sharp bearish price break, followed by a period of horizontal or “sideways” price action. As you can see in the USD/CAD chart below, both the flag pole and flag are apparent. One of these patterns is the Bull Flag Pattern, which is a bullish continuation pattern that is commonly found in stocks and cryptocurrency trading. In this article, we will discuss what is a bull flag pattern and how to identify it, with examples.

Basically, all you need to do is to spot one support and one resistance level. Now, the downside is that you’re going to miss some of these breakouts if the bear flag doesn’t develop on the price chart. Unlock our free video lessons and you will learn the exact chart patterns you need to know to find opportunities in the markets. Learn the exact chart patterns you need to know to find opportunities in the markets.

Everything You Need To Know About Bull Flag Patterns

Eventually, the price peaks and forms an orderly pullback where the highs and lows are literally parallel to each other, forming a tilted rectangle. This is a great lesson on managing risk and respecting your stops. Never assume that any pattern in the market will work 100% of the time.