What Is A Flag And Pole Pattern?

Trading in financial markets requires various tools that support traders' investments. These tools can be anything from a simple chart to advanced softwares that help predict market changes.

Today's article will analyse the best chart pattern, flag and pole. A specific chart formation identifies the continuation of the previous market trend. To learn about the pattern in detail, let's dive in.

Flag and Pole Pattern

Traders, when analysing the market, have to look into many aspects. Flag and pole is one such chat pattern that guides traders to identify the market characteristics. Flag individually is a price pattern and pole as well.

The flag and pole pattern work in a short time frame and help understand the market movements.

The pattern forms on the chart and helps to identify the continuation of the previous trend. It takes from a point when the price moves against the same market trend.

In the flag and pole pattern, the price makes a sharp movement in a direction. This reminds traders of a pole or the flagpole.

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Once the pattern forms on the chart, it moves sideways. Then, it attempts to change the trend by moving upwards. However, it has no or little momentum.

What do Flag and Pole patterns describe?

A flag and pole pattern in technical analysis signifies various aspects to traders. The pattern says that the buyers continuously and aggressively try to change the primary trend.

They bring it down by creating more market demand for the asset. However, the asset moves in range due to the selling pressure. With the help of patterns, traders try to identify the potential breakdowns in the assets.

When the price breaks, the lower range of the flag closes below it. So, traders can expect a continuation of the primary bearish trend in the market.

How does the Flag and Pole pattern work?

The flag and pole pattern refers to the tight consolidation in the price actions. It shows the counter-trend move that follows after the sharp directional movement in the price of assets.

In the pattern, there are five to twenty price bars.

The flag pattern can be upward or downward trending. The upward trending refers to the bullish flag, while the downward trend is the bearish flag. In addition, the bottom of the flag should not exceed the midpoint of the flagpole that preceded it.

Flag and pole pattern has five characteristics that define their working:

• Preceding trend
• Consolidation channel
• Volume pattern
• Breakout

Confirmation of price moves in the same direction as the breakout

When the flag pattern forms on the chart, the bearish and bullish patterns have similar structures. However, they differ in the trend direction with some differences in volume pattern.

In the bullish pattern, the volume increases in the preceding trend and declines in consolidation. In contrast, the bearish pattern volume increases first and then holds the level as they tend to increase as time progresses.

Also, the pattern is characterised by parallel markers over the consolidation area. When the lines converge, patterns are called a wedge or pennant pattern. These patterns are reliable continuation patterns.

Traders use the pattern to enter an existing trend setup and will continue.

How do trade Flag and Pole patterns?

In trading, the flag and pole pattern traders must consider three essential factors. These factors make trading easy with simple establishing of the strategy. The factors are:

Entry

The flag and pole are a continuation pattern of the current market trend. But traders should wait for an initial breakout to avoid false market signals. Traders can expect to enter a flag when the price breaks and closes above the upper parallel trend line in a long position.

For bearish traders should enter a short position a day after the price closes below the lower parallel trend line.

Stop-Loss

Traders use stop-loss in flag patterns to trade. Therefore, they enter the opposite side of the stop-loss point.

Profit Target

Traders use the pattern to set their profit targets. They use the difference measured in price between the flag pattern's parallel trend lines.

Conclusion

Flag and pole pattern is of great use for online traders. They can use it to enter the market, set their profit target and use the stop-loss to understand the entry point—a beneficial chart pattern.

The article gives a short yet significant introduction to the pattern and how traders can use it for effortless trading.