How To Trade Flag Chart Patterns – With Annotated Diagram

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The Flag pattern usually occurs after a significant up or down market move. After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word “flag”.

The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before.

The chart of eBay (EBAY) shows many Flag patterns:

flag continuation chart pattern

Flag Potential Buy Signal

When price has moved higher and prices have consolidated, creating a channel of support and resistance, a potential buy signal is given when prices penetrate and close above the upward resistance line.

Flag Potential Sell Signal

Assuming prices previously moved downward, then after a period of price consolidation, a potential sell signal is given when price penetrates and closes below the support line.

For more information on the concept of support and resistance, (see: Support & Resistance).

Another similar pattern discussed is Triangles (see: Triangles).

How to Start Technical Trading

If you are interested in trading stocks & commodities using technical analysis, have a look at our reviews of these regulated brokers available in to learn which charting & analysis tools they offer:

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.90%-89.00% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Watch videos on the Flag Chart Pattern as well as the related Pennant Chart Pattern.

Further Reading

Learn more about technical analysis indicators, concepts, and strategies including Candlestick reading basics, Windows & Gaps, MACD, and many others.

Also see our guides on Forex, Bitcoin, CFD, and Option brokers to find out which tools brokerages offer their clients.

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