Enter a trade when the price action breaks the Flag in the direction of the trend. We are BOEING stock price now looking at the H4 chart of the GBP/USD, which shows a bullish Pennant chart pattern.

The initial targets on all flag patterns will be the high or low of the flagpole. If the flagpole price peak is exceeded, then you can use Bollinger Bands and or fib price levels. To get fib price level targets, first plot the high to low and low back to high price levels of the flagpole. This should not only give the fib retracement levels but also the fib extension levels. There are three potential price target levels indicated by 1.27, 1.414 and 1.618 fib extensions, which each double as a potential price reversal zone . Last but not least, no technical pattern or strategy is immune to exceptions. So while the sloping flag typically signals exhaustion, there will be times where it breaks in the direction of the major trend.

bull flag vs bear flag

Once the the flag pole ends the bulls gain confidence and begin buying; only to be faked out as the stock drops again. In the Getting Started Group Chat post 5 daily charts that you feel are Bull flag and your game plan for how you would trade them .

Bull Flag Pattern Trading Strategy

Bear flag patterns are common continuation patterns found on any chart and any time frame. The trend of the stock doesn’t necessarily have to be down, but typically these bear flags are indicative of a downward trend. The bear flag Uralkaliy stock price is the upside down version of thebull flag. Watch our video above to learn more.As we well know, the stock market is a war between the bulls and the bears. The bearish candlesticks that form the flagpole is formed by panic selling.

  • Ideally, you put it all together and make an informed trade and give yourself the best possible outcome for success.
  • A flag pattern is highlighted from a strong directional move, followed by a slow counter trend move.
  • If the breakout was to the downside, subtract $1 from the top of the flag.
  • Stay on top of upcoming market-moving events with our customisable economic calendar.
  • Get $25,000 of virtual funds and prove your skills in real market conditions.

If you really have balls draw out the resistance line you are looking to buy through and a line showing your out . Now if this seems like a lot of work, realize we do this all day long for each and every trade. The current sentiment picture is also more characteristic of a bear flag, as too many are bullish from both the AAII survey of individual investors and the financial newsletter writers. There seem to be more negative analysts on the financial TV shows, but this is difficult to quantify.

The support level is the price that a stock won’t fall below, and resistance is the price that a stock doesn’t seem to ever climb bull flag vs bear flag above. The longer the support and resistance levels hold, the more likely they’ll enter an eventual breakdown or breakout.

Bull Flagging Lesson

The bear flag chart pattern strategy only looks for trading opportunities when you get a breakout below the flag price structure to be a seller. There are two basic approaches to enter the market with the bear flag pattern. Aggressive traders will enter at the top of the bearish flag as this will secure a little bit of bigger profits. A bear flag pattern is constructed by a descending trend or bearish trend, followed by a pause in the trend line or consolidation zone. The strong down move is also called the flagpole while the consolidation is also known as the flag.

And it’s an awesome way to stay disciplined while trading. If you only want to trade bull flags and there’s no bull flag then … just stay away. Every bull flag pattern will be slightly different. But remember, this isn’t an exact science … That’s why you need a solid stop loss in place. Note that while we put the bear flag in a separate section, the flat top and pennant patterns can also be flipped to form bearish indicators.

Two Trade Stop Loss Spots

Sixty percent of the trades result in small wins and losses that usually balance each other out. Traders who want a higher probability usually will wait for the reversal to have a strong breakout in the new direction. At that point, the probability of a swing trade is often 60% or more, but the stop is far away.

bull flag vs bear flag

In such market conditions, there is a lot of “meat” for the trend to continue and the only way to ride it is to trail your stop loss. However, I prefer to trail my stop loss until the market takes me out of the trade. One of them is to have a pre-determined profit target based on length of flag pole. Give your trade more room to breathe by setting your stops a distance away from the market structure. Just look through your past trades and notice how often you got stopped out only to watch the market do a complete reversal.

Live Trading With Dttw On Youtube

As I mentioned above, bull and bear flags alike are most often traded as continuation patterns. They are one of my favorite technical structures to trade because they typically offer favorable entries and precise targets. With a bullish flag, you’ll notice the flag sloped down slightly after an incredible move higher.

The protective stop should be placed at one tick above the high price of that bar. Once the entry bar closes, the stop should be moved to one tick above the high of this entry bull flag vs bear flag bar. A bull flag provides a trader with the opportunity to go long using a stop order to buy at one tick above the high price of the bar, which formed the second bottom.

Some traders prefer to use the starting point to copy-paste the trend line where the breakout move initially started i.e. within the body of the flag. While both are generally acceptable, we advise you to use the breakout point to copy-paste the flagpole. Any move to the inside body of the flag invalidates the pattern. Most times, after the Flag completes the two targets, you would want to close out the entire position and bank your profits. But in some instances, you may decide to keep a small position open to ride out a larger trend move. So, if you continue to see signs of a strong trend even after Target 2 has been reached, then by all means, keep a portion of the position open. Make sure to manage your trade using price action based clues to determine a final exit point.

You guessed it – we get a sloping flag pattern, an example of “unhealthy” consolidation. For this pattern to be considered a bullish continuation, the consolidation area would need to have faced away from the momentum. 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. Before we get into the importance of sloping flags, it’s important that you understand how and why the traditional flag pattern forms. This strategy will not make you a Genius at day trading but it will increase your odds of becoming profitable and a consistently profitable trader. From my experience, ABCD patterns have an extremely high probability of occurring in any stock. For example, AMD had ABCD patterns formed almost every single day last week.

Final Flags

The “tighter” the range, the likely the market will breakout higher. After the strong move higher, the market needs to take a “break”. Here’s where you can expect a potential Bull Flag to Money creation form as the market does a pullback. Interested in trying the number 1 trading platform? In a hot market, a flat top breakout is worth a shot … as long as you remember to cut those losses.

W hen there is a strong uptrend in the stock market, many traders will look for bull flag formations to help them make their entry and exit strategies for trading stocks. These flag patterns are what help traders analyze and evaluate stocks before they trade. The below chart highlights an upside breakout from a bull flag pattern, which is accompanied by a high-volume bar. The high volume confirms the breakout and suggests a greater validity and sustainability to the move higher. Traders of bull and bear flag patterns might hope to see the breakout accompanied by a high-volume bar. A high-volume bar to accompany the breakout, suggests a strong force in the move which shifts the price out of consolidation and into a renewed trend.

It’s best to trade scared and lock in profits earlier. Your exit target is the length of the flagpole added to the bottom of the flag. On a heavily shorted stock, the dip is due to longs locking in profits and shorts shorting more.

bull flag vs bear flag

This page is devoted to sharing my insights and techniques in order to help you become a smarter trader/investor. My method of stock selection starts with a proprietary scanning method to select a group of individual stocks for more extensive analysis. This includes an in-depth study of the volume patterns that I use to determine the strength of a stock’s trend. Those with the strongest trend, either up or down, are then further analyzed to determine entry, exit and risk levels. I use Fibonacci retracement, projection and extension analysis to determine both profit objectives as well as stops. As shown by the bull flag chart pattern above, traders have been buying risk through commodities, the stock market, and risk-based currencies.

Last but not least is the angle at which the consolidation forms. Notice how each move lower formed at a steeper angle than that of consolidation.

The bullish pennant formation is found within the uptrend of a futures contract. It is called a bull pennant because it resembles a pennant hanging on a flag pole. Normally, a pennant formation is a continuation pattern with narrowing price action. This action usually follows a strong up move on the charts .

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