With Entry Method 3, you will have the worst risk-to-reward ratio for the same Take Profit level…. The best way is to test all 3 entry methods to see which actually works for you, and which best suit your trading style. With any trading setup, the more signals you have supporting the direction of your trade, the higher the chances of your trade working out. So when traders trade the Bull Flag Pattern in the Stock Market, what they want to look out for is for an increase in volume when the market starts moving up from the Bull Flag Pattern.
In the chart above, you can see that the volume has increased when the market broke out from the Bull Flag Pattern. And this gives traders an added validation that the Bull Flag Pattern has a higher chance of working out.
That means the volume you see in the Forex market is not an accurate representation of the total volume in the market. We use the added confluence of a divergence. Now, there are a few indicators that can identify divergence…. Since I use TradingView as my charting platform, my examples will show the Stochastic Oscillator from there.
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In the diagram above, you can see that the market has formed a higher low while the Stochastic Oscillator has formed a lower low. So at the point where the bullish candlestick pattern is formed, we want the Stochastic Oscillator to form a lower low. As you can see, the market is making a higher low but the Stochastic Oscillator is making a lower low. So whenever you are looking for an entry, you want to see that there is a hidden divergence to give you the added confluence that the Bull Flag Pattern will work out. Step 2: Look for the Bull Flag Pattern to form.
Ideally, you want the formation of the flagpole to have fewer candlesticks compared to the flag. Then place your Stop Loss below the low of the bullish candlestick pattern. Place your Take Profit level at either 1. At this point, you can see that the Stochastic Oscillator is indicating a hidden divergence with a lower low.
It then made a small pullback of two candlestick bars before going up again to form the flagpole. As you start looking at your charts to identify Bull Flag Patterns, you will find that there are many of them forming all the time. So after the flagpole is formed, the market started to consolidate and pullback to the 20 EMA forming the flag.
Generally, the more candlestick bars there are forming the flag, the higher the probability of the pattern working out.
Forex Flag Pattern Trading Strategy
The more coils there are in the spring, the stronger the force of the bounce when you release it. So similarly, the more candlestick bars there are in the flag pattern, the stronger the breakout can be.
At the same time, the Stochastic Oscillator is showing a clear indication of a hidden divergence. Now that you know exactly what to look out for on your chart when it comes to the Bullish Flag Pattern, you will start to realize that it actually forms very often. Many traders get tempted to trade it every time it shows up thinking it will make them more profitable….
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The Definitive Guide to Trading the Bull Flag Pattern in Forex
Who am I? On this blog, I will be sharing with you everything I've learned along the way to make you a more successful trader in the markets, and more importantly, help you create an edge trading the forex market :. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Additional menu. The Bull Flag Pattern is one of the most common chart patterns that appear in an uptrend. In fact, every time there is an uptrend, this pattern will appear.
However, not many traders know how to trade this pattern properly. When traded wrongly, you will get your trading account wiped out. So how do you exactly trade the Bull Flag Pattern? And which ones should you avoid like the plague? In this guide, I will get into the details so that by the end, you will know exactly how to spot a Bull Flag Pattern accurately… And be able to trade it confidently and profitably.
What is a Bull Flag Pattern? The Bull Flag Pattern is continuation pattern.
What are bull and bear flag patterns?
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How to Trade Bearish and the Bullish Flag Patterns Like a Pro
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Long Short. Oil - US Crude. Wall Street. More View more. Previous Article Next Article. Bull flag vs bear flag What is a bull flag? How reliable is the Bull Flag in forex trading? The bear flag appears in a downtrend as opposed to the bull flag which occurs in an uptrend The bear flag pattern will breakout from the consolidation once price breaks the lower channel Both the bear and bull flag chart patterns measure the target price as a projection using the length of the flagpole Further Reading on forex trading patterns Consider other chart patterns like the head and shoulders , double top and double bottom in order to develop your pattern recognition.
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