Flag Pattern
A flag is a continuation pattern that forms after a sharp price move (the pole), followed by a rectangular consolidation that slopes against the prior trend. Bull flags slope down; bear flags slope up.
Understanding the Concept
Flags are some of the most reliable patterns in trading. The sharp move shows conviction, and the flag shows the market catching its breath before continuing. The measured move target is the pole's height added to the breakout point. Flags typically form over 1-3 weeks—longer than that and the pattern weakens. Volume should decrease during the flag and spike on breakout. If you see a textbook flag, it's often worth trading because the risk/reward is usually excellent.
Real-World Example
Ethereum pumps from $2,000 to $3,000 (the pole) then consolidates in a downward-sloping channel between $2,700 and $2,900 (the flag). Breakout above $2,900 targets $3,900 ($1,000 pole added to breakout).
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