Breakout Confirmation: A bullish breakout occurs when the price breaks above the flag’s upper trendline.A lower volume indicates reduced market activity and potential exhaustion. Volume: During the flag consolidation phase, trading volume is expected to be lower than the flagpole consolidation phase.The longer the flag pattern extends, the less reliable it becomes. Duration: Flags are usually short-term patterns that last a few hours or days.Ideally, the flag should slope away from the flagpole in the opposite direction. Flag: The consolidation area, also known as the “flag”, is characterised by a relatively low trading volume and price movement.In relative terms, the length of the “flagpole” indicates the “potential target” for the subsequent price movements. Flagpole: The first price movement before the consolidation area is known as the “flagpole”.This consolidation usually takes place in a channel, where prices move in parallel to the trend lines. Consolidation Area: In the flag part of the pattern, price consolidation is typically in the shape of a rectangle.Price Movement: A flag pattern is initiated by a significant price movement of the flagpole, which can be bullish or bearish. What are the Indicators of a Flag Pattern? With its straightforward visual structure and robust predictive capabilities, the pattern is easy to identify, making it a useful reference point for advanced traders and their decision making. The flag pattern is characterised by a steep price movement (the “flagpole”) followed by a period of consolidation (the “flag”) in the opposite direction of the initial movement. When the pattern appears, you can expect the observed price trend to continue. What is a Continuation Pattern?Ĭontinuation patterns refer to any pattern that indicates signs of price trend continuation. Following on from the first instalment in our series, this piece dives deeper into continuation patterns and how to identify flags, pennants and wedges to better inform your trading.
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