12/24/2023 0 Comments Reversed flag patternoThe bear flag forms during a bearish trend in the market as a result of the price drop as sellers take control of the market. It has all the components that a bull flag has, but are the only inverse. The bullish flag formation forms down to upside while the bear flag forms upside down. The bearish flag is exactly the inverse of the bullish flag pattern. It is a formidable pattern for forex trading if it is correctly identified after locating all of its components on the chart. However, the reliability of the bull flag pattern depends on the correct identification of the pattern. Traders then seek profit by analyzing the flagpole length preceding the flag. To trade the bullish flag, traders can enter the market at the bottom of the price channel or show patience for price break above the high of the upper channel. How to trade when you see a bullish flag pattern? Wait for the price break out high with height equal to the flagpole.Look to enter on the breakout above the upper channel’s high or at bottom of the flag.It may not be a flag pattern if the retracement goes below the 50% Generally, the retracement ends below the 38% threshold of the original trend.Identify the formation of the bull flag as a result of downward sloping consolidation.Look for a preceding uptrend making flagpole as we know that a bullish flag pattern forms during a bullish trend.The following are some hints to correctly identify the bull flag. It is necessary to correctly identify the bull flag to make a move successful. There are three components of any flag pattern that makes it a bit difficult to identify the pattern. Hence, the bull flag chart pattern resembles a rectangle or downward sloping channel because of those parallel trend lines. The price peaks eventually, prices rise and form a pullback while the lows and highs are parallel to each other. The formation of the bull flag takes short-sellers of the guard as more buyers jump into the market. The upside breakout confirms the bullish flag pattern and traders prepare for a long position. The bull flag starts with a strong, almost vertical, bullish trending move which then stabilizes and then turns into a minor bearish correction with parallel tops and bottoms. The bullish flag forms during a bullish trend. The continuation is the point of the flag formation that shows the end of consolidation and indicates that the market is again trending in the original direction.The length of the time period is irrelevant but is important to note that more aggressive breakouts occur after longer periods of consolidation. The formation of the flag is the key to the flag pattern. The flag represents the consolidation of the market after a strong price movement.The overall distance of the price movement is calculated by measuring the difference between the previous low or high and the current low or high. The angle of the slope is irrelevant as far as the validity of the flag formation is concerned. The flagpole represents the initial price movement and it can represent both, uptrend or downtrend.Both bullish and bearish flag patterns have the same components but are in inverse shape over the chart. The flagpole, the flag, and the continuation are the three components of the flag formation. This is because, in shorter time periods, it moves in the opposite direction of the current price trend in the market that we observe on the trading chart in a longer period of time. It is named the flag pattern because its use reminds traders of a flag on a flagpole. The working of the flag pattern is quite simple. Technical analysts and traders use the flag pattern to enter the market, set profit targets, and to set a stop-loss. The flag pattern is one of the most reliable patterns to predict an upcoming reversal of trends or breakouts after a consolidation period. That makes it perfect for novices and beginners to begin with. It is also very easy to identify its characteristics. There are several trading patterns that traders use to identify moves but none of them is as efficient and effective as the flag pattern. According to the flag, prices continue in the same direction after breaking out of the formation. After a strong up or down movement, the flag formation tends to embed consolidating prices. The flag forms after a significantly large price movement as it represents market consolidation. Being a continuation pattern, it predicts that the market will continue in the same direction after the end of the pattern. It is a continuation pattern and it also represents consolidation. The flag pattern is a powerful pattern used in technical analysis.
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