The flag pattern is a popular flag in technical analysis, and has a bullish and a bearish type. This flag is used for determining the continuation of a trend. In this article, we will first explain what a flag is, and then go through bullish and bearish flags. Stay with us.
This pattern is called a flag because its shape looks like a flag, and exactly like a flag, it has a pole. You can see the general shape of a flag pattern in the image below:
In this image, the strong established upward trend is the pole, and the short-lasting bearish trend that you see after it is the flag.
You have probably found out that we have two types of flags: bullish and bearish. By bullish flag, we mean a flag that confirms the continuation of a bullish trend (exactly like the image above). By bearish flag, we mean the one that confirms the continuation of a bearish trend. Let’s elaborate more on these two types of flags in the following sections.
What is a bullish flag?
A bullish flag forms when we have a strong upward trend, and then a weak downward move. By the way, this downward move is not strong enough, and the upward trend takes back its strength once again. This means that users’ enthusiasm for buying that cryptocurrency is still strong, and the upward trend is very likely to continue. Therefore, a bullish flag is a good signal to BUY. The general shape of a bullish flag is as follows:
What is a bearish flag?
A bearish flag is the opposite point of a bullish flag, but it follows the same concept. It forms when we have a strong downward trend, and then a weak upward move. However, this upward move is not strong enough, and the downward trend dominates once again. This means that users’ will for selling that cryptocurrency is stronger, and the bearish trend is more likely to continue. Therefore, a bearish flag is a good signal to SELL. The general shape of a bearish flag is as follows:
We tried to explain the main concept of the flag pattern, and how we can get buy/sell signals from this pattern. Now you know that we have two flag patterns: the bullish one and the bearish one. The bullish flag signals a good time to buy, and the bearish flag signals a good time to sell. So, the flag pattern is a trend continuation signal in general. Have you ever used this pattern in your trades/investments? Share your experiences with us.
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