What are Bull and Bear Flag patterns?

Bull and bear flags arepopular price patterns recognised in technical analysis, which traders often use to identify trend continuations. In this article we look at how to trade these opportunities.

Are Bull flags and bear flags a trader's friend?

Bull flags and bear flagscan be a trader's friend in strongly trending markets, but they do not always perform as advertised. In some cases, the pattern can present a trap known as a "false breakout" when price breaches the boundary of the flag and quickly retraces.

What is a bull flag & how does it work?

When trading a bull flag, traders might use a move below the lower level of support as a stop-loss or failure level In a bull flag, rising volume into the flagpole and declining volume into the flag validates the pattern and assumptions that the preceding uptrend will be continued

How do bear flag patterns work?

Bear flag patterns work in the same way as bull flag patterns, just in reverse. Every good bear flag pattern trade should be made up of three elements: Stop Loss: Most traders use the opposite side of the flag pattern as a stop-loss to protect themselves against the price moving in the other direction.