Bull Flag Momentum Strategy

Bull Flag Momentum Strategy

8 min read

Knowing and understanding the bull flag momentum strategy is crucial if you want to a successful day trader. But what works for one person may not work for another, though, so it pays to learn a few simple ones in the beginning.

  • Do you know what the bull flag momentum strategy is? It’s a candlestick chart pattern that allows you to make money on a bullish breakout. Waiting for a bull flag off the 9 ema gives you the best entry and you can use the 9 ema for an exit point.

Did you know there are traders out there that trade one strategy? They find that it works so well that they don’t need to look for anything else.

The bull flag momentum strategy is one of those. In fact, we have someone in our trading service that trades strictly bull flags. He likes to take advantage of the bullish momentum.

One of the great things about sticking with a strategy like the bull flag, is that you become a master at it. Therefore, you’re more likely to be successful.

However, don’t feel like you have to trade one strategy and one strategy only. There are many patterns that set up through out the day.

If you can spot such strategies and the setups are there, then take the trade. It’s all about making sure you have the proper stock market training and good risk management.

Does Over Choice Mean Stressed Out?

Yes, I believe it does. As we face an ever-rapidly increasing pace of life governed by email, instant messaging, social media and 24-7 busyness, we are living out what Alvin Toffler coined the “age of over-choice.”

An article I recently read dramatically summarized the staggering number of choices we face every day. According to the article:

  • Dryers Ice Cream offered 34 flavors in 1977; they sell 300 today
  • When Whole Foods opened in 1974, it sold two types of lettuce; now it sells 40
  • Frito Lay started with two chips – Frito’s corn chips and Lay’s potato chips – now it has 204

We face so many options that we may find ourselves paralyzed, looking at the possibilities. And for what it’s worth, I don’t want it to happen to you.

Profitable day trading chart patterns should be simple and here’s one I think you’ll find useful. Check out our live trading room if you want help calming the over choice of trading.

One Simple Strategy Known as the Bull Flag Momentum Strategy

In day trading, the Bull Flag Momentum Strategy works quite well on low float stocks under $10. Unfortunately, there is a downside with trading strategy: It is difficult to manage the risk, and you need a fast execution platform.

Bull Flag Momentum Strategy

Bull flags are quite easy to identify once you know what to look for. As you can see in the picture above, several large candles are going up (like a pole), with a series of small candles moving sideways or down (like a flag).

For us day traders, we call this flag “consolidation” or the time when buyers are selling and taking their profits. Despite all the selling going on, surprisingly, the price does not tumble.

The main reason for the price remaining strong is two-fold: Buyers are still buying, and the sellers are not yet in control. Many traders who missed out on the first opportunity to enter (before the Bull Flag started) are swimming around in the water, looking for their chance to strike.

Wise traders know they shouldn’t buy when the price is spiking, or as we say, “chasing the stock.” The pros wait to enter during quiet times. Which is why good stock trading is key.

Avoid Chasing the Moves

If you’re a first time trader, you’ll want to avoid chasing stocks like the plague. Not only is it an account killer, but it’s also a confidence killer. I’d hate to see you lose faith in yourself because you blew it all in one trade.

In an attempt to prevent this when trading the Bull Flag formation, you must wait for two things. First, wait until the stock finds it’s a high point and then wait for the consolidation period.

As soon as the stock price breaks in the consolidation area, you can pull the trigger and begin buying.

More often than not, a stock will show several consolidation periods. That does not mean all are ripe for entry.

In fact, I only enter during the first and second consolidation periods. After that, I absolutely refuse to enter for fear of momentum and interest waning.

Furthermore, these consolidation periods are risky; price likely has been over-extended for a while now, which means buyers will soon be losing control.

Avoiding trades after the second consolidation is a smart rule and you’d be wise to adopt it. In fact, we really like to put bull flag setups on our penny stocks list we post each night.

How to Trade the Bull Flag Momentum Strategy

  1. When my scanner or someone in the Bullish Bears chat room alerts me that a stock is surging up, I patiently wait for the consolidation period.
  2. I watch the stock during the consolidation period – if you forgot, this period looks like a “flag”.
  3. Once price moves over the high of the consolidation candlesticks, I enter the trade. Don’t forget to set your stop loss at the break below the consolidation periods.
  4. I sell half of my position for a profit on the way up.
  5. Move the stop loss from the low candle of the consolidation period to my entry price (this is my break-even point).
  6. Finally, I sell the rest of my position when my target is hit or I think that the stock is losing steam.
Bull Flag Momentum Strategy

$ETSY was a stock on our stock watch lists for a swing trade back whe nteh stock was $45. You can see on the 5 min chart it made a bull flag then pushed up. It hit a high and then began to reverse. You could have day traded if off the bull flag and the 9 EMA around $49.50 and made at least 50 cents on the trade. Check out our stock alerts for real time swing trades.

Further Considerations

It’s safe to say that the Bull Flag is just an ABCD pattern that often happens on low float stocks. But, unlike the ABCD pattern, you want to buy only at or near the breakout.

The reason for this is because in low float stocks, price moves up fast and fierce then fades quickly. I guess you could call a Bull Flag more or less a momentum and scalping strategy.

Facts About Trading the Bull Flag

  • It’s a long based strategy found in an up trending stock
  • Never short a Bull Flag pattern
  • Get in at the breakout when the stock is running
  • Do NOT buy during consolidation
  • Only jump in when there is a confirmation of a breakout
  • You can reduce your risk by waiting until the stock breaks the top of the consolidation area before you buy
  • Trading this momentum strategy is risky so beginners need to be careful

What to Look for in Any Day Trading Strategy

First and foremost, when you use any day trading strategy, you find that there is something similar about stocks that are moving.

We can scan 5,000 stocks, looking for similar criteria and get up to 20 stocks (give or take) each trading day. Based on our results, these stocks may move 20 to 30 percent in a day, and this is how we make a living.

  • The first criteria: A float under 20 million shares.
  • The second criterion: Strong daily charts with no resistance nearby and above the Moving Averages.
  • The third criterion: The High Relative Volume is at least two times above average.
  • The fourth criterion: A fundamental catalyst or “technical breakout”; this is what causes the stock to move. For example, an announcement made by the FDA

Wrapping It up

Day trading is a worthwhile activity, but you must know what you are doing. Hence knowing a pattern like the bull flag momentum strategy. A good day trading strategy can last a lifetime and this can mean a lifetime of profits.

Related Articles

Market Breadth Indicators

Market Breadth Indicators

Market breadth indicators are an excellent metric to use to gauge the relative stock performance between stocks that are advancing and stocks that are declining.

Read More »


If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly.

We are opposed to charging ridiculous amounts to access experience and quality information. 

That being said, our website is a great resource for traders or investors of all levels to learn about day trading stocks, futures, and options. Swing trading too! 

On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews.

We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.

Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.

It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

Invest the proper time into your Trading Education and don’t try to run before you learn to crawl. Trading stocks is not a get-rich-quick scheme. It’s not gambling either, though there are people who treat it this way. Don’t be that person! 


The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms. We provide our members with courses of all different trading levels and topics.

If you’re a beginner, intermediate level, or looking for expert trading knowledge…we’ve got you covered. 

We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Free.

Just choose the course level that you’re most interested in and get started on the right path now. Become a leader, not a follower. When you’re ready you can join our chat rooms and access our Next Level training library. No rush. We’re here to help.

Click Here to take our free courses.