Bull Flag Price Action Trading Guide

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rising bull flag

Or perhaps you’re committed to generating at least $1 million in profits from the stock market. Tight Bull Flags are another variation of the Bull Flag pattern. The key characteristic of this pattern is the consolidation phase’s narrow range, implying a tight struggle between buyers and sellers. It’s possible to https://www.bigshotrading.info/blog/how-to-become-a-amazing-at-day-trading-how-to-be-a-day-trader/ use this pattern regardless of your trading style, but be aware of the other factors involved in the price movement. Just because you see a huge price jump followed by a period of consolidation doesn’t mean it’s definitely going to spike again. Flat top breakouts on the other hand show highs on the same level.

  • This trade setup assumes another breakout after the consolidation period.
  • Therefore, we are looking to identify an uptrend – the series of the higher highs and higher lows.
  • Finally, look for a price move out of the flag to confirm a bullish breakout.
  • When you see that pattern, you know another strong rise is coming.
  • Bull flags usually resolve one way or the other in less than three weeks.

A bull flag, also known as a “bullish flag”, is a technical analysis bullish continuation chart pattern that signals a continuation in the price of an existing uptrend. A bull flag leads to a further increase in the price of a market. Both bear flags and bull flags are represented in the same way in the same chart pattern.

Upstart ($UPST) forms a High Tight Flag pattern

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And over time, it has evolved from a rigid pattern form into a trading concept. Furthermore, the bull flag pattern’s primary goal is to enable you to profit from the market’s current momentum. As a result, crypto traders may use the data it offers to identify entry points with low risk in relation to potential rewards. Unlike a bullish flag, in a bearish flag pattern, the volume does not always decline during the consolidation. The reason for this is that bearish, downward trending price moves are usually driven by investor fear and anxiety over falling prices. The further prices fall, the greater the urgency remaining investors feel to take action.

What is a bullish flag?

As you may well know, a healthy trend is one that pauses from time to time to rid itself of the short-term traders and accumulate new buyers or sellers. As you might expect, it’s the exact opposite of the bull flag we just studied. Now, I’ll be the first to admit that the AUDCHF bullish flag above wasn’t the cleanest of patterns.

rising bull flag

In both bearish and bullish flag patterns, traders can place the take profit level at a distance equal to the distance between the top of the flag and its pole. The inverted cup and handle is a bearish continuation pattern that occurs in a downtrend and resembles the shape of a ‘cup’ (inverted u shape) and handle (upward sloping line). The pattern provides traders with ideal sell signals as it indicates that the market prices are going to fall further. A bull flag is basically a continuous pattern that appears as a brief pause in the trend by following a strong price move, moving higher. It looks like a downward sloping rectangle, often represented by two parallel trend lines against the ongoing trend lines. During this period that we also call consolidation, volumes mostly dry up through its formation and push the pattern higher on the price breakout.

It’s All About the Pattern

To execute a trade, one may consider buying the security itself or purchasing a call option at the breakout price or entry point. Calculating a target price is essential for determining the potential profit from the trade. Traders can achieve this by adding the initial rise between points 1 and 2 to the breakout price. The bull flag has a sharp rise (the pole) followed by a rectangular price chart denoting price consolidation (the flag).

Even though the bull flag pattern tells about a continuation pattern, the trader’s risk-return profile determines the success of any crypto trading strategy. If the Bull Flag upwards continuation chart pattern forms on the forex chart it signals that the market is taking a break before resuming the current upwards rising bull flag trend. Forex Traders should wait for a confirmation of this Bull Flag chart pattern before opening a trade based on this bullish continuation chart pattern. The bull flag pattern trading is quite a straightforward process as long as the previous phase – spotting and drawing the formation – is done properly.

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