🚩 Flag Pattern – Short-Term Continuation Signal

The Flag Pattern is a short-term continuation pattern that forms after a strong price movement (flagpole). It signals a brief consolidation before the trend resumes in the same direction.

📘 What Is the Flag Pattern?

The Flag Pattern is a short-term consolidation that occurs after a sharp price move (flagpole). The consolidation is usually rectangular or slightly sloped in the opposite direction of the trend. The breakout usually continues in the direction of the initial trend.

• Appears after a sharp price movement (flagpole).
• Consolidation forms a rectangular or sloping flag shape.
• Volume decreases during the consolidation and rises on the breakout.
• Breakout in the direction of the prior trend confirms continuation.

💡 Market Psychology

- Flagpole: Sharp movement shows strong buying or selling pressure. - Consolidation: Temporary pause as traders take profits; volume decreases. - Breakout: Trend resumes in the direction of the flagpole with increasing volume.

✅ Pro Tip: Volume is key — look for higher volume on breakout to confirm continuation.

⚙️ How to Trade Flag Patterns

1. Identify the initial sharp move (flagpole) and the small consolidation (flag).
2. Wait for the price to break out in the direction of the flagpole.
3. Enter a position in the direction of the breakout.
4. Place a stop-loss below the consolidation for bullish flags or above for bearish flags.
5. Set a target using the length of the flagpole projected in the breakout direction.

🏁 Conclusion

Flag patterns are reliable short-term continuation indicators. Correct identification, confirmation of breakout, and monitoring volume help traders profit from the continuation of trends.

“Flags show the market catching its breath — then the trend charges forward.”