7-07 Wedges and Flags

Next, you need to look for the best opportunities. Look for clean charts with strong rising bull flag patterns that you’ve learned to recognize through hours and hours of studying.

We have been producing top-notch, comprehensive, and affordable courses on financial trading and value investing for 250,000+ students all over the world since 2014. There’s always a chance that things could go wrong. So, you need to know how to protect your profits and cut your losses quickly when necessary. The safest way to trade pennants is to wait for confirmation before you enter a long position.

Pros of using the bullish flag

The High Tight Flag pattern, a type of bull flag pattern, was first introduced in William O’Neil’s “must-read” classic, How to Make Money in Stocks. Pennants are popular with Day Traders because this chart pattern rarely https://www.bigshotrading.info/ shows up in longer time frames. If you like to trade shorter term, you should be looking at charts closely for pennants and you may start seeing them in your dreams at night because they are so reliable and common.

However, it’s crucial to let your winners ride as long as the price action remains bullish–especially with the rare High Tight Flag pattern. Only a few stocks during any bull market are strong enough to form the rare High Tight Flag pattern. Both the base breakout and cup and handle patterns are relatively common in a bull market, but the High Tight Flag is uncommon. A flag pattern is a correction within a strong trend. During the correction, the price should move slightly opposite to the main trend. If the price doesn’t exceed a 50% deviation from the overall trend, there’s a high chance it’s a flag pattern.

Should I use Bear Flag and Bull Flag Patterns?

One common question traders have is whether the bull flag pattern is the same as the flat top breakout. The answer to this question is no, they are not the same.

• The article also includes a concrete example of trading forex using a popular bear flag strategy and examines how bear flags compare with bull flags.
• This flag is right at the top of the flagpole, and the following breakout is beautiful.
• Lock in those singles and remember to sell into strength.
• This could be because of a major news event like better earnings forecast or a rate hike by the Federal Reserve.
• In the first bull flag pattern, there were long lower shadows at the bars ending each bearish leg.
• Bull flag patterns do have a statistical edge if traded correctly but in the event the set up fails you need to know where to get out.