The “bull flag” or “bullish flag pattern” is a powerful indicator for trading uptrends or topside market breakouts. The bull flag pattern itself is essentially just a continuation pattern; it’s just sort of representing a pause or a pullback in the market after a stronger move. Bullish or bearish flag patterns are short-term trends that may last from one to six weeks. If a bull flag pattern is correctly spotted, it will indicate the continuation of a bull trend that already exists, and the price will increase after the pattern is finished.

In the chart, the bullish flag looks like a narrowing triangle or rectangle, which demonstrates the decrease in volumes and indicates that market participants are locking in their positions. This allows beginner and experienced traders to find a good entry and limit levels – after the narrowing of the range, a bullish pennant of the upper side of the triangle will follow. To buy a pullback using bull flags, it’s a good idea to incorporate another technical analysis tool. If a bullish flag coincides with a Fibonacci retracement level, buying the market may be a good idea. This is the opposite of a bear flag pattern, which focuses on downtrends.

Support

Successful traders use technical analysis tools to analyze assets’ past performance and try to predict the duration of the pattern. In the picture above you can see the EURUSD Forex trading pair with clearly visible elements of the bullish flag pattern. Like any other technical indicator, the bullish flag pattern has a collection of unique advantages and disadvantages.

Over longer periods, the pattern becomes a rectangle or triangle. Here’s an example of a simple bull flag chart continuation pattern. Another popular strategy when using the bullish flag is to use a buy stop order. In this case, you Bull Flag Pattern should place a buy stop slightly above the upper side of the flag. If there is indeed a bullish breakout, the buy stop will become the new buy order. STMX/USDT Technical Analysis – Big Bull Flag Breakout Signals Potential 12x Gains!

What Is a Bull Flag Pattern?

Also, with this strategy, you don’t have to track the price dynamics. HowToTrade.com helps traders of all levels learn how to trade the financial markets. The strong directional move up is known as the ‘flagpole’, while the slow counter trend move lower is what is referred to as the ‘flag’. We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake.

None of these entities provide legal, tax, or accounting advice. The point of the strategy is to identify the optimal entry point with the help of a pending buy order. You can open a long position when, after a downward consolidation, the candle closes above the upper limit of the trend. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.

What You Should Know About a Bull Flag Pattern

Once the pole is found, identify the range of consolidation or wavering in the price of the stock (this is the flag). Prices will likely fluctuate during this stage before they begin trending upwards, assuming the bull flag does what is expected. This is because the consolidation creates a resistance line at the higher end, while the lower end is the support line. When the stock price rises above the resistance level and continues in an upward trend, the pattern has been established. Understanding patterns can be a beneficial tool when figuring out how stocks work, though even when used in combination with other resources, stock trading is still a high-risk activity. Bull (bullish) flag is one of the classic uptrend continuation patterns.

• We also have training for building a foundation before a forex strategy matters.
• The bull flag pattern derives its name from the shape formed when traders chart out the trend lines.
• Let’s look at some strategies implemented to trading the bull flag.
• This consolidation phase usually occurs in the form of a downward or sideways trend, and is followed by a resumption of the upward trend.

The best way to measure the profit target is to use the higher and lower bull flag channel lines and use the distance to set the expected profit target. The flag, which represents a consolidation and slow pullback from the uptrend, should ideally have low or declining volume into its formation. In an uptrend a bull flag will highlight a slow consolidation lower after an aggressive move higher.

An Explanation of the Bull Flag Pattern

In this flag pattern, trading results in a pullback from the top of the flag pole. Descending flag patterns are the most common variant of the bull flag. When the top and bottom lines of the flag are plotted, a parallel downward trend results.

He has been a writer since 2019, and his experience in the Fintech industry has inspired most of his articles. When Temitope is not writing, he takes his time to learn new things and also loves to visit new places. They’re two of the most common crypto flags, but knowing how to use them properly is important. In our simulator here at TradingSim, you can practice trading Bitcoin with BTC futures.

It is thought that the bear flag suggests the price will continue to move downward once it leaves the area between the 2 lines. In this article, we will talk in detail about the features of the bull flag pattern and take a closer look at the advantages and disadvantages of this pattern. This information has been prepared by IG, a trading name of IG Markets Limited.

They are traded in the same way, but each has a slightly different shape. A flag or pennant pattern forms when the price rallies sharply, then moves sideways or slightly to the downside. This sideways movement typically takes the form or a rectangle (flag) or… The bullish Flag pattern is usually found in assets with a strong uptrend.

The period of consolidation is followed by a breakout and then a continuation of the ongoing bullish trend. The main difference between the bull and bear flag patterns is the direction of the trend. The bullish flag pattern occurs in an uptrend, while the bearish flag pattern appears in a downtrend. These patterns are helpful for traders who wish to take advantage of short-term and long-term market trends. The trading patterns work in all financial markets, not just the crypto market. If you see active growth, then a downward consolidation in the form of a parallelogram or a rectangle, and then a strong rebound, you can say with certainty that this is a bull flag.