Lesson 4: Learn Forex Bull Flag Formation Patterns
A bull flag is a bullish continuation pattern. It follows a strong move upwards and
consists of a flagpole as the strong move to the upside - and a consolidation phase
which is known as the flag.
As you can see, there has been a strong bullish move but because the market needs
to adjust to the new higher prices, it goes into the consolidation phase and the price
retraces lower in a narrow range. Note - that for it to be a genuine bull flag, the two
lines forming the flag need to be parallel - whereas often they will be sloping
downwards.
There are two basic approaches to entering the market with this pattern. Aggressive
traders will enter at the bottom of the flag for the maximum profit; conservative
traders will wait until the price breaks out from the formation - and only then will they
enter the market. The price target for this formation should be the height of the
flagpole measured up from the bottom of the flag.