Bull Flag pattern trading strategy : The feature of the bull flag strategy is the stock made a strong move up on high relative volume that forms the pole. Then stock consolidation goes near the top of the pole on lighter volume, forming the flag. The stock breaks out of consolidation patterns on a high relative volume to continue the trend. The Bull Flags are a subset of strategy. Bull flag trading is a simple trading technique. The hard part of this pattern is finding them with scanners like Ideas. Bull flag patterns have a statistical edge if it is traded correctly. There is a couple of different ways to manage the trade.
The common thing is to place a stop below the consolidation area. The next way is to use the 20-day moving average as the stop. If prices close below the moving average then you should close out your position.
Bull:-Bull is used to describe an upward trend in a stock or index. Also called stock prices that are rising. If a stock is bullish it shows that price is going up. And if the stock market terms bear indicates a downward trend. If the stock price falls it is called bearish.
Flag:-The flag is a chart pattern that resembles a flag on a flagpole. Here the stock price rises rapidly and forms a straight pole. Then consolidates over a period of time where the flag forms. During the consolidation period, the stock price rises or falls in small increments.
Working
The Bear Flag pattern is just the opposite of a Bull Flag Pattern. It is the continuation chart pattern that signals the market to move lower. See that the range of the candles is more bearish than usual. They will tend to close near the lows. After moving lower market needs to take a break. Then you expect a potential Bear Flag to form as the market does a pullback. The pullback must have a smaller range of candles.
The Bear Flag pattern is just the opposite of a Bull Flag Pattern. It is the continuation chart pattern that signals the market to move lower. See that the range of the candles is more bearish than usual. They will tend to close near the lows. After moving lower market needs to take a break. Then you expect a potential Bear Flag to form as the market does a pullback. The pullback must have a smaller range of candles.
Bull Flag vs. Bear Flag
The bull flag rise, dip and consolidate before continuing to move up. The bear flag is the exactly opposite of it. They will look the same but the price is falling. After the initial first drop flag will form and trend upward before continuing to breakdown.
Plan for trading
Be prepared to cut losses. The traders who fail to plan will fail. The exit plan on a bull flag pattern is to place your stop at the lowest part of the flag. After then you enter its volume peak. When you decide to exit there makes sure to follow. If it is hard put a stop there. Your exit target is the length of the flagpole that is added to the bottom of the flag.
Identification guidelines for bull flags
The market must be above the 20period exponential moving average. The price bar should not form a bar high below the 20period EMA.
Conclusion
The bull flag pattern is the best addition to any trader’s toolbox. It has a simple way to enter on breakouts with lower risk. There are some variations of the patterns like the flat top breakout and pennant and use intraday. It depends on the day trader or swing trader. The simple bull flag guidelines will give a wide range of continuation patterns. Hence, they provide plenty of opportunities for close analysis. The bull flag pattern is best for newer traders. The trading is clean and easy to recognize. The key to trading any pattern is to learn how to manage your risk.
Bull Flag vs. Pennant
The support and resistance lines on a bull pennant flag will resemble a cone. The pennant flag narrows to a point breaks to the high side. Other bull’s flags will have parallel lines. So all bull pennant flags are bull flags but not all bulls flags are pennant flags.
Bull Flag vs. Flat Top Breakout
The traditional bull flag has a downtrend after the initial rally. A flat top break is not the same as a classic bull flag. But there is similarity and trade them the same way. The flat-top breakout the flat line near the chart high. This line forms a resistance level and the support level is not defined.
