How to Trade Bull Flag Patterns

What does a bull flag look like? It’s a beautiful pattern that excites momentum traders around the world. Bull flag patterns are one of the most popular bullish patterns. They consist of either a large bullish candlestick or several smaller bullish candlesticks up forming the flag pole, followed by several smaller bearish candlesticks pulling back down for consolidation, which forms the flag. Look for price move out of flag to confirm bullish breakout. Watch our video on how to identify and trade them below.

What Is a Bull Flag Pattern & How to Identify These Patterns?

A bull flag pattern consists of a larger bullish candlestick which forms the flag pole. It’s then followed by at least three or more smaller consolidation candles, forming the flag. You will see many bull flag patterns that consolidate near support levels then when support holds, price action breaks out of the flag. Bull flag patterns are a common pattern found in charts. Bull Flags are known as a bullish continuation pattern. It has a big move up together with consolidation. The bull flag pattern is one of the most common patterns found on charts.

Bull Flag Patterns

Watch our video above to learn how to identify flag patterns. Japanese candlesticks patterns were invented by legendary rice trader Homma. He saw the correlation between price action and emotions. Even back then emotions influenced trading.

Candlesticks are a way to gauge the way traders feel about a stock. We may be scattered all over the world and don’t know each other, however, candlesticks tell us how we all feel about a security. Learn how to trade the different types of stocks.

Basics of Bull Flag Patterns

bull flag patterns

A bull flag chart pattern is seen when a stock is in a strong uptrend. As a result, it’s called a bull flag because of its shape. There’s a strong move up resulting in bullish candlesticks forming the pole.

The flag is formed by the consolidation that happens after that big move up. As a result, the consolidation period can be filled with candles such as doji candlesticks and hammer candlesticks. These tell a story of indecision.

Hence the shape of the flag isn’t as important as what it’s telling you. A stock that has a strong move up and consolidates but refuses to drop is telling a story. As a result, know what the story is.

When you see that pattern, you know another strong move up is coming. No chart pattern is going to look perfect and that’s ok. Hence why we study.

Finding Them in the Wild

If you’ve been in candlesticks school and paying attention, then you’ve heard the phrase, find the patterns within the pattern. Candlesticks group together over a period of time to form these patterns.

Bull flag candlesticks often look like they can be apart of a larger pattern. For example you may find them within bullish patterns like the cup and handle pattern or inverse head and shoulders pattern. Not every pattern will look exactly like the text books. That’s why it’s important to spend time with experienced traders so they can point out these imperfect patterns for you in the wild.

Again, it’s important to look at real world charts and try to spot the patterns in them. They’re not always picture perfect. Bull flags may form, and then again they may break down. Typically because there was a resistance level you missed, or something else that caused the pattern to fail. No pattern is a guarantee of results.

If you’re relying on one pattern to tell the story, you’ll find trading to be difficult. That’s why it’s so important to be able to see patterns within patterns.

Looking to learn stock trading? Take our free stock market training courses to help you get started.

What Is a Bull Flag Breakout?

A bull flag breakout happens when a large bullish candlestick forms a flag pole with consolidation candles that pull back near support levels. When a bullish candlestick breaks above the consolidation of a flag then that’s when a potential breakout is occurring. Ideally you’d like to see price continue and break above the top of flag pole.

What Do the Technicals Say a Bull Flag Should Look Like?

Technical analysis is important but it’s nothing without candlesticks. Candlesticks are the most important part the technical analysis basics. They form key support and resistance areas.

Candlesticks alone do not form support and resistance areas! You can use moving averages as well as part of your trading plan to form a more complete picture. A lot of traders will use the 9 period exponential moving average and the VWAP trading strategy as additional buy and sell signals.

Bull flags can be found on any time frame you use for trading. When you couple them with moving averages like the 9 and 20 exponential moving averages, you can have a pretty good formula for trading.

Moving average crossovers on any time frame supply important buy and sell signals. Coupling these different tools make for a clearer picture.

What Does A Bull Flag Look Like
A 4HR bull flag on $AAPL looks delightful to trade long on a break of the flag structure into the opening bell.

How to Trade Bull Flag Patterns

  • How to trade bull flag patterns:
  • Watch for a bullish candlestick that forms a flag pole.
  • Look for at least 3 or more consolidation candles that hold support levels.
  • Once price breaks above the last smaller consolidation candle take entry at break of high.
  • Watch if price can break above high of flag pole.
  • Use candlestick close below midway of flag as your stop.

Bull flag trading signals a continuation of a strong trend upwards. Just because they’re common doesn’t mean they should be taken lightly.

You need conformation such as a strong move up. Without that the formation becomes questionable and trading it as a bull flag is risky. You also need volume on the first move along with consolidation.

A second strong move up after that consolidation is also necessary. As stated earlier, no pattern is going to look the same every time. Sometimes they’re messy and bull flags can take on a couple different forms.

No matter what bull flags look like, they’re always a sign of a potential strong move up coming. Look at what patterns they’re apart of just to confirm that. Take our candlesticks patterns course.

What Do Bull Flags Look Like
Bull flags are very popular on penny stocks. Checkout the before and after on this 1 minute chart of $TRCH. Above you see the flags firing off. Check the image below for the third flag pole out.
How to Trade Bull Flags
Beautiful. We were all over this trade in the trade room.

What Does a Bull Flags Look Like? Study Them!

Bull flags are happy little patterns that show the bulls are in control. (I am channeling my Bob Ross here)

To see them all, you must be like an athlete who spends hours studying their opponent. They train to better themselves and just the same, traders need to study these patterns so they are ready when they step in the ring. Trading isn’t for the faint of heart. Even the best traders fail.

Michael Jordan and Tom Brady didn’t just wake up the greatest athletes of their sport. They dedicated time and effort to be great. They have failed yet it doesn’t deter them. We can learn a lot from that approach.

It’s equally important to spend time practicing in your paper account not only finding the patterns in the chart but also practice trading them. You’ll never regret the time spent learning. Take our free online trading courses.

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