Trading
Charts 101CandlesticksIndicatorsRisk managementAll chart patternsHead and shouldersInverse head and shouldersDouble topDouble bottomAscending triangleDescending triangleBull flagBear flagCup and handleFalling wedgeRising wedgeSupport and resistanceTriple topTriple bottomSymmetrical triangleRounding bottomPennantRectangleAscending channelDescending channelBroadening formationGolden crossDeath crossBart patternWyckoff accumulationWyckoff distributionWhat moves marketsTradingViewMarket cap vs price
The short answer
A sharp rally, then a tight orderly pullback, then continuation.
What you are looking at
A near vertical move called the pole, followed by a small channel drifting slightly downward.
How traders act on it
The break above the flag channel is the entry, and the pole height gets added to the breakout point.
Closes, not touches
Wait for a close beyond the level, not a touch. Intraday spikes through a level that reverse before the close are extremely common, and they exist partly because so many stops sit just beyond.When it fails
If the pullback retraces more than about two thirds of the pole, it is not really a flag any more.
Failure is normal and it is not a problem, provided you decided your invalidation level before entering and sized the position so that being wrong is survivable. See risk management.
Context that changes the odds
| Factor | Improves the setup | Weakens it |
|---|---|---|
| Higher timeframe trend | Pattern agrees with the daily or weekly direction | Pattern fights the larger trend |
| Volume | Expands on the breakout | Breakout happens on thin volume |
| Duration | Formed over many candles | Formed over three or four candles, which is mostly noise |
| Level confluence | Trigger sits at a well tested level | Trigger sits in empty space with no history |
| Market conditions | Trending, orderly market | Choppy range, where nearly every pattern fails |
Other patterns
Head and shouldersInverse head and shouldersDouble topDouble bottomAscending triangleDescending triangleBear flagCup and handle
Common questions
What is the difference between a bull flag and a reversal?
A flag drifts down gently on falling volume, giving back only part of the pole. If the pullback is steep, on rising volume, or retraces most of the move, it is not a flag any more.
How far can a flag retrace and still be a flag?
Rules of thumb sit between a third and a half of the pole. Beyond that the character has changed and calling it a flag is optimism rather than analysis.
Where to go next
All 26 patternsThe full set with diagrams.Risk managementSizing and stops.CandlesticksThe building blocks.
Practice spotting these
We go through live charts together and separate the real setups from the shapes your brain wants to see. That second skill is the harder one.