How to Identify Bull and Bear Flags When Trading Crypto

A bull flag is a candlestick chart pattern in technical analysis that occurs when an asset is in a strong upward trend indicating bullish sentiment. These patterns form when a consolidation, another short spike, and some more consolidation follow a substantial spike in price. In short, these bullish flag patterns indicate a pause in the uptrend that leads to uptrend continuation, and bullish flags are one of the most reliable continuation patterns. The https://www.bigshotrading.info/ trading is quite a straightforward process as long as the previous phase – spotting and drawing the formation – is done properly.

The reason for this is that bearish, downward trending price moves are usually driven by investor fear and anxiety over falling prices. The further prices fall, the greater the urgency remaining investors feel to take action. The price chart from Answers Corp. below is a nice example of a bullish flag that may be breaking out. While the flag is not a perfect rectangle, what is more important is the basic premise behind the overall pattern. Note the strong rise in the stock as it forms the flag pole, and the tight consolidation that follows. Bulls are not waiting for better prices and are buying every chance they get.

TRADING STOCKS IN THE BULLISH BEARS COMMUNITY

Trading using the https://www.bigshotrading.info/blog/bull-flag-pattern-bullish-and-trading-strategies/s is not difficult and can spur the rise of profitable traders — we know that this is a trend continuation pattern. First you need to draw the pattern in the chart, then find the optimal entry point and set a stop loss. Bullish flag formations are found in stocks with strong uptrends and are considered good continuation patterns. They are called bull flags because the pattern resembles a flag on a pole. The pole is the result of a vertical rise in a stock and the flag results from a period of consolidation.

It is formed when price movements create a narrow, sideways consolidation that slopes downward. Even though the bull flag pattern tells about a continuation pattern, the trader’s risk-return profile determines the success of any crypto trading strategy. A Bull Strategy is a trading strategy that aims to profit from an upward trend in the market.

What is a bull flag?

Following the breakout, traders begin to look for possible entry points into the trend. There are also different ways this is done; one of the common strategies is to wait till the close of the candlestick that breaks the consolidation. A breakout in the opposite direction for each means there has been an alteration of the pattern, and the trend may not continue in the expected direction. For example, in an uptrend, where the price is expected to move upwards, a price break downwards could indicate that the trend is about to change. The bull flag isn’t a difficult pattern that can occur at any time and for any asset.

• It is called a flag pattern because it resembles a flag and pole.
• If the price doesn’t exceed a 50% deviation from the overall trend, there’s a high chance it’s a flag pattern.
• In contrast, a bearish pattern is spotted when price action is in a descending trend line, followed by consolidation.
• As a result, crypto traders may use the data it offers to identify entry points with low risk in relation to potential rewards.

The resistance levels remain as high as the flag pole and create a horizontal line across the top. The bottom support levels may continue to ascend creating a triangle (sometimes called a ‘pennant’). Bull and bear flags are just two types of flag patterns mirroring each other. When the price consolidates, the Volume indicator is expected to decrease as bulls aren’t strong anymore. Simultaneously, the upward breakout of the flag’s resistance will signal the strength of bulls, so the trading volumes should increase. As you can see in the chart above, the 38% Fibonacci level coincides with the bull flag pattern.

Step #2 Enter Long Position at the Break of the Flag Pattern

You can check this bite-size video by our trading analysts on how to identify and trade the bull flag pattern. Upon the flag forming a significant multi-candle consolidation phase, an entry point is located above the upper bounds of the flag. After an increase in volume is confirmed, a buy order is placed above the flag. The bull flag pattern is named such because of its appearance. And, this appearance makes it a user-friendly, easy-to-identify chart pattern.

Other indicators like MACD and RSI can help you figure out more exactly when but identifying chart patterns are a great way to see a reversal coming. With these you can more easily see how the range of a certain move is changing. They are traded in the same way, but each has a slightly different shape.

Bull flag patterns are essential for every trader

Although these are key points to pay attention to, it’s also important to consider overall trends in the market to be sure you don’t misinterpret the signals. Whatever the case is, this is a sign of strength and the market could breakout higher. So, if you see a steep pullback with large range of candles, then it’s probably not a Bull Flag Pattern. I want you to promise me that you will do your work by tweaking, backtesting, and demo trading these strategies consistently first before risking your hard-earned money. Because it would tell us that the level isn’t sustaining pretty well, and it might be a false breakout instead. Again, you must be already familiar when it comes to plotting support and resistance.