We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • The #Dow Jones moved confidently higher last week as it added onto recent gains. Now, #stocks will aim to continue their rally while enjoying support from prior all-time highs. Get your technical analysis on #equities from @PeterHanksFX here: https://t.co/Qb89HIWxBY https://t.co/HMguTvD157
  • How can you trade #forex after a major release? Find out: https://t.co/sdxcXb8q60 #tradingstyle https://t.co/LNcbvVhIc2
  • Have you been catching on your @DailyFX #podcast "Global Markets Decoded"? Catch up on them now, before new episodes release! https://t.co/mk1w1DM2Rh https://t.co/m763epaH2C
  • Crude #oil prices, $NOK and $SEK may rise if Donald Trump’s speech on trade war developments amplifies market buoyancy against the backdrop of critical US CPI and retails sales data. Get your market update from @ZabelinDimitri here:https://t.co/5rdK7xsQNq https://t.co/YnlQjKNZdS
  • RT @next_china: U.S., China chief trade negotiators spoke by phone on Saturday, Xinhua reports https://t.co/dMQtd0g4jY
  • The $AUDUSD and $EURUSD downtrend may prolong as traders counterintuitively buy into their descent. Meanwhile, the USD/CAD uptrend may accelerate on rising net-short bets. Get your market update from @ddubrovskyFX here: https://t.co/dlzJ31kf3f https://t.co/xp8P9MmCgb
  • As we head into next week, Cable is continuing to digest the massive leg higher last month, which at some point soon could mean another surge. Get your $GBPUSD technical analysis from @PaulRobinsonFX here: https://t.co/LJ42YhDe3X https://t.co/5hGwhGBpLB
  • Asia’s vast and growing importance to the world economy is not yet matched by the presence of a currency trading center to rival the established order. Get your update on market drivers in Asia from @DavidCottleFX here: https://t.co/E2hqoRdO7q https://t.co/urMnUCq4fn
  • RT @markets: White-hot pot stocks have flamed out in spectacular fashion https://t.co/3GsVsRyZaZ
  • What is the best time to trade #forex? Find out: https://t.co/M9R46r5ewa #tradingstyle https://t.co/gJ1QDrox67
How to Trade Bullish Flag Patterns

How to Trade Bullish Flag Patterns

2019-10-31 15:05:00
Warren Venketas, Markets Writer
Share:

The bull flag pattern is a great pattern to add to a forex trader’s technical arsenal. Explosive moves are often associated with the bull flag. This article will look at the potentially higher probability forex trading opportunities of the bull flag pattern.

Learn to trade the bull flag pattern: Main talking points 

  • What is a bull flag?
  • How to identify a bullish flag on forex charts 
  • Bull flag trading strategy
  • How reliable is the bull flag?
  • Bull flag vs bear flag

What is a bull flag?

A bull flag is a continuation pattern that occurs as a brief pause in the trend following a strong price move higher. The bull flag chart pattern looks like a downward sloping channel/rectangle denoted by two parallel trendlines against the preceding trend.

During this period of consolidation, volume should dry up through its formation and resolve to push higher on the breakout. The actual price formation of the bull flag resembles that of a flag on a pole hence its namesake.

Bull flag pattern:

bull flag pattern

How to identify a Bullish Flag on Forex Charts

It can be complex identifying a bull flag on a chart because the pattern entails several different components. Traders will need to correctly identify and understand these components to trade this pattern successfully. Key things to look out for when trading the bull flag pattern are:

  1. Preceding uptrend (flag pole)
  2. Identify downward sloping consolidation (bull flag)
  3. If the retracement becomes deeper than 50%, it may not be a flag pattern. Ideally, the retracement ends at less than 38% of the original trend
  4. Enter at bottom of the flag or on the breakout above the high of the upper channel boundary
  5. Look for price to break higher with a length potentially equal to the size of the flag pole

Bull Flag Trading Strategy

The following trading example shows the bull flag on a forex chart.

AUD/CAD bull flag pattern

AUD/CAD bull flag pattern

As shown by the bull flag chart pattern above, traders have been buying risk through commodities, the stock market, and risk-based currencies. As a result, the AUD performed well against most other currencies in part because it offers a higher rate of return owing to its interest rate. Hence, traders have a fundamental back drop to support the technical picture for additional strength in AUD.

The AUD/CAD is no stranger to the flag pattern. The previous uptrend (flag pole) is noted in black. Prices consolidated in a gently downward sloping channel (blue). To trade the flag, traders can time an entry at the lower end of the price channel or wait for a break above the upper channel (yellow). Traders then look to take profits by projecting the length of the flag pole preceding the flag (black dotted line).

How reliable is the Bull Flag in forex trading?

The reliability of the bull flag pattern depends on the success of the checklist mentioned above. When all components of the bull flag are identified and present within the chart, the bull flag pattern is considered to be a formidable pattern to trade.

The table below identifies the advantages and limitations of the bull flag pattern:

ADVANTAGES

LIMITATIONS

Works in all financial markets

Can be complex for novice traders

Pattern helps determine entry and limit levels

Good risk-reward ratio

Bull Flag vs Bear Flag

The bull flag and bear flag represent the same chart pattern however, just mirrored.

  • The bear flag appears in a downtrend as opposed to the bull flag which occurs in an uptrend
  • The bear flag pattern will breakout from the consolidation once price breaks the lower channel
  • Both the bear and bull flag chart patterns measure the target price as a projection using the length of the flagpole

Further Reading on forex trading patterns

Consider other chart patterns like the head and shoulders, double top and double bottom in order to develop your pattern recognition. We also recommend taking our interactive forex trading patterns quiz to test your knowledge of some of the most commonly used patterns in forex trading.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.