These patterns provide traders with clear entrance and exit points and can be used for smaller and larger timeframes.
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The formation of the flag pattern indicates the continuation of the price chart trend. This is a technical analysis tool used by traders to identify buy and sell signals in the crypto market. Flag formation consists of strong directional movements or poles followed by slow counter movements or flags. Flag patterns can occur in two forms. in short,
- Bull flag pattern
- Bear flag pattern
Bear flag pattern
The bear flag pattern shows the continuation of the existing downtrend. The pole represents the first aggressive downward movement followed by an upward integration channel or flag. The pattern is considered complete only if the price falls below the flag’s support line. This pattern shows that there is more selling pressure on the downside than on the upside.
The bear flag pattern looks like an upside down flag. The first sharp descent represents the pole. The next integration phase forms the flag. Integration or retracement of the first drop of up to 50% is generally considered acceptable. However, about 40% retracement is ideal.
Transaction system: Traders have to wait for confirmation that the pattern is complete. This happens when the price falls below the flag’s support level. Traders can enter short positions at this point. Price movements above the flag’s resistance level can be used as a stop loss level, and the price target can be set at a distance equivalent to the height of the flagpole from the breakout point under the flag. Traders should also be aware that the volume will decrease during the integration phase.
Bull flag pattern
The bull flag pattern is formed after the first uptrend representing the flagpole, followed by a descending integrated channel representing the flag. The flag indicates a slow move after the first high move. This pattern shows high buying pressure during the uptrend.
The bull flag pattern can be identified by a clear sharp upward movement followed by a slow downward movement. Next, the price pattern should exceed the flag’s resistance and confirm the completion of the pattern. Similar to the bear flag pattern, about 40% downward retracement is ideal and 50% is acceptable.
Transaction system: Traders must wait for the pattern to complete and see the breakout on the flag before entering a long position. Stop loss can be set to the flag’s support level to prevent loss in the event of a breakout under the flag. The price target can be set equal to the flagpole distance measured from the price breakout above the flag resistance.
The bullish and bearish flag pattern is a reliable technical indicator when used in conjunction with other technical indicators such as volume guides and RSI (Relative Strength Index) to measure the strength of price trends. It provides traders with good entrance and exit points and can be used for smaller and larger time frames.
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Disclaimer: This article was created by Giottus CryptoExchange as part of a paid partnership with The News Minute. Investing in crypto assets or cryptocurrencies is susceptible to market risks such as volatility and is not guaranteed to be profitable. Do your own research before investing and seek independent legal / financial advice if you are uncertain about your investment.