What is a flag chart pattern?

The pattern has a “flag” appearance because the small rectangle—the consolidation—is connected to the pole—the large and swift move. A flag chart pattern is formed when the market consolidates in a narrow range after a sharp move. The flag portion of the pattern must run between parallel lines and can either be slanted up, down, or even sideways.

How do you know if you have a flag pattern?

When you see an increase in volume during the flagpole part and a decrease in volume during the flag phase, then that is a good sign. Secondly, you typically do not want to see the flag formation retrace more than 50% of the flagpole, otherwise, you might not be dealing with a flag pattern at all.

How to trade a flag pattern?

The Flag pattern gives two lines running parallel to each other. -The best time to trade the Flag pattern is after a breakout. The breakout acts as a confirmation of the Flag pattern. -You can also trade the Flag pattern when it is showing a strong trending market. -Always place a stop loss order at the lowest point of the Flag pattern.

What is a flag & how does it work?

A flag can be used as an entry pattern for the continuation of an established trend. The formation usually occurs after a strong trending move that can contain gaps (this move is known as the mast or pole of the flag) where the flag represents a relatively short period of indecision.