If you use technical analysis and indicators for safe and profitable trading, the bullish flag pattern is the instrument you would certainly love to have in your arsenal. The bullish flag is generally associated with explosive moves. As a result, the pattern can provide exceptional trading opportunities although the strategy can also be a bit risky. It all depends on the trader's skills, experience, and additional tools to use.
In this article, we will show you what a bullish pattern is. We will discuss simple ways to identify it as well as use together with your bullish trading tactics.
Bullish flag pattern explained
What is a bullish flag? The term indicates that the pattern refers to the asset price in the uptrend. When we say uptrend, we mean a very strong one. The pattern got the name "bullish flag" because it actually looks like a flag once you have managed to identify it on a trading chart.
To understand how the bullish flag works, here are some baseline features that will make things clearer:
- The pole is formed when a stock makes a powerful move upwards featuring a high relative volume.
- The flag is formed when a stock consolidates on the pole top featuring a bit lighter volume.
- The stock continues the trend breaking out form consolidation getting back to a higher relative volume.
Judging by the issues above, it becomes clear that the pattern mainly refers to the momentum trading strategy. The good news is that traders can implement it within any period. For example, some momentum traders tend to use the bullish flag within a 2 or 5-minute timeframe as the best option to scalp the movement of the stock price.
Swing traders may also benefit from the bullish flag pattern and use it on their daily trading charts as well.