FlagPattern

Flag pattern is a short-term continuation pattern that occurs after a sharp price move. It consists of a “pole” (the sharp move) followed by a “flag” (rectangular consolidation that slopes against the trend). Bull flags slope down after an upward pole; bear flags slope up after a downward pole. When price breaks out of the flag, it typically continues in the pole’s direction.

How Flag Patterns Form

Flags show brief consolidation during strong trends:

Bull Flag Formation:

       |          ← Pole (sharp move up)
      /|
     / |____
    /  |    \____
   /   |         \____ ← Flag (slopes down)
  /    |              \____
       |                   \→ Breakout up

Bear Flag Formation:

       ____/
   ____/   ← Flag (slopes up)
  /    |
 /     |
       |          ← Pole (sharp move down)
       |\
       | \
       |  ↓ Breakout down

Quick Reference: Flag Pattern Signals

Element	Bull Flag	Bear Flag
Pole direction	Up (sharp rally)	Down (sharp drop)
Flag slope	Downward drift	Upward drift
Breakout	Above upper flag line	Below lower flag line
Target	Pole length added up	Pole length subtracted

Example: Trading Bull Flag

Bull Flag Breakout:

Phase	Price	Volume	Action
Pole Start	$80	High	Strong rally begins
Pole End	$100	High	+25% in 3 days
Flag Forms	$100→$95	Low	5 days consolidation
Breakout	$101	High	BUY on flag break
Stop	$93	-	Below flag low
Target	$121	-	Pole ($20) + breakout

Pattern Characteristics

The Pole

• Sharp, steep price move
• High volume
• Should be nearly vertical
• Occurs in direction of larger trend

The Flag

• Rectangular consolidation
• Parallel support and resistance lines
• Slopes against the pole direction
• Lower volume than pole
• Brief duration (5-15 bars typically)

The Breakout

• In direction of pole
• Volume expansion confirms
• Should happen before flag gets too long

Flag vs Pennant vs Wedge

Pattern	Shape	Lines
Flag	Rectangle	Parallel lines
Pennant	Triangle	Converging lines
Wedge	Triangle	Converging, same slope

Trading Strategy

Entry

Breakout beyond flag boundary in direction of pole.

Stop Loss

• Bull flag: Below flag’s lowest point
• Bear flag: Above flag’s highest point

Target

Measure pole length and project from breakout point.

Position Sizing

Flags are high-probability but can fail. Size accordingly.

Common Mistakes

1. Flag too long – Extended consolidation loses momentum. Flag should be brief.

2. Weak pole – Pole needs to be steep and sharp. Gradual moves don’t qualify.

3. No volume pattern – High volume pole, low volume flag, high volume breakout.

4. Against larger trend – Flags work best when aligned with the dominant trend.

How JournalPlus Tracks Patterns

JournalPlus lets you tag flag patterns at entry, tracking your success rate with these high-probability continuation setups.