PRICE ACTION
• A steep upwards price action initiates from (1) till finding first resistance (2), creating the flag's pole.
• Price action reverses direction from (2) and forms lower highs and lower lows in a narrow flag formation till it finds the lowest support in the formation at point (3).
• The pattern is completed when price action reverse direction from the last touch to the lower flag border and goes upwards till it breaks the upper border at point (4).
NOTES
• Before the breakout, at least two highs (including the flag's pole high) and two lows are needed for a valid pattern.
• The flag's pole is usually a strong and sharp upwards price action.
• Volume is usually high at the flag's pole, as well as when breaking the flag's upper border.
• This pattern is commonly found on short and medium-term time-frames.
TRADING THE PATTERN
• Trade entry: the pattern is traded after price action breaks the flag's upper border at point (4).
• Take profit: identified by measuring the flag's pole, which is the vertical distance between points (1 - 2), that measurement is then applied from the breakout point (4).
• Stop loss: the flag's lowest low (3).
• A steep upwards price action initiates from (1) till finding first resistance (2), creating the flag's pole.
• Price action reverses direction from (2) and forms lower highs and lower lows in a narrow flag formation till it finds the lowest support in the formation at point (3).
• The pattern is completed when price action reverse direction from the last touch to the lower flag border and goes upwards till it breaks the upper border at point (4).
NOTES
• Before the breakout, at least two highs (including the flag's pole high) and two lows are needed for a valid pattern.
• The flag's pole is usually a strong and sharp upwards price action.
• Volume is usually high at the flag's pole, as well as when breaking the flag's upper border.
• This pattern is commonly found on short and medium-term time-frames.
TRADING THE PATTERN
• Trade entry: the pattern is traded after price action breaks the flag's upper border at point (4).
• Take profit: identified by measuring the flag's pole, which is the vertical distance between points (1 - 2), that measurement is then applied from the breakout point (4).
• Stop loss: the flag's lowest low (3).