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F!"#$: How to Trade Bullish Flag atterns
By Jeremy Wagner, Head Forex Trading Instructor
21 February 2012 19:20 GMT
There are many different patterns that traders follow to help time entries and exits. The flag pattern is one that tends to ath my interest when ! find it
beause they an pro"ide explosi"e mo"es. The #$%&#% appears to be in the middle of a potential bull flag pattern. Today' we will loo( at how to identify
higher probability trading opportunities off the bull flag pattern.
The flag pattern is fairly simple with )ust three omponents.
1. The flag pole
2. The flag
3. # strong up trend
First identify an instrument in a strong up trend *flag pole+. Through the duration of this uptrend' e"entually pries need to rest and onsolidate those gains.
This prie onsolidation beomes the ,flag- of the pattern. The flag portion of the pattern tends to be a gently downward sloping prie hannel.
#dditionally' this onsolidation will retrae a small portion of the pre"ious up trend. !f the retraement beomes deeper than .0/' it may not be a flag pattern.
!deally' we-ll see the retraement be less than 01/. 2ine this is a ontinuation pattern' we loo( for pries to brea( higher with a length e3ual to the si4e of the
flag pole.
(Created using FXCMs Marketscope !" c#arts$
For the past 0 months' traders ha"e been buying ris( through ommodities' the sto( mar(et' and ris( based urrenies. #s a result' the #ustralian %ollar has
performed well against most other urrenies beause it offers a higher interest rate of return. 2o we ha"e a fundamental ba( drop for additional strength in
the #ustralian %ollar. Today' we will math the #$% against the &anadian %ollar.
The #$%5&#% is no stranger to the flag pattern. 6a( in 7tober 2011' we saw this pair form and omplete a flag pattern as the #ustralian %ollar pushed higher
in on)untion with the sto( mar(et bouning higher.
(Created using FXCMs Marketscope !" c#arts$
8ere is a piture of the ompleted pattern. The pre"ious uptrend *flag pole+ is noted in green. 9ries onsolidated in a gently down ward sloping prie hannel.
This hannel retraed only 01/ of the pre"ious up mo"e. To trade the flag' you an time an entry at the lower end of the prie hannel or wait for a brea( up
abo"e the upper hannel. :oo( to ta(e profits by pro)eting the length of the flag pole at the bottom of the flag *orange dotted line+.
(Created using FXCMs Marketscope !" c#arts$
!f we fast forward to today' the #$%5&#% ontinues its marh higher. 9ries are urrently onsolidating sideways in a gently down ward sloping prie hannel.
Therefore' we ha"e an opportunity to enter into a trade with at least a 1:2 ris( to reward ratio.
:oo( for an entry near the bottom of the bla( prie hannel as support to go long. 9lae a stop loss )ust below the swing low. 2o that means an entry near
1.0;0< with a stop near 1.0.90. 7ne pries reah the top of the bla( hannel' loo( to mo"e the stop loss to brea( e"en. !f this pattern holds up' the
#$%5&#% ross rate ould mo"e to 1.10.
How to Trade &ymmetrical Triangles
By Wa%ker &ng%and, Forex Trading Instructor
20 2eptember 2011 11:19 GMT
!dentifying symmetrial triangle patterns an beome an asset to a trader in any mar(et. To ta(e ad"antage of the pattern' first we must be able to identify it.
# symmetrial triangle is simply defined as a tehnial pattern forming a triangle from a desending resistane line and an asending line of support.
These lines of support and resistane an be found by onneting the wi(s of andles on your hart. 7n the =$>5$2% two hour harts below' resistane is
defined by onneting the 2eptember ;th high at 1.?21. with the 2eptember 1.th high of 1.090;. 2upport is deri"ed by onneting the 2eptember 11th low at
1.0?9? and the 2eptember 19th low of 1.0.1..
(Created using FXCMs Marketscope !" c#arts$
7ne a symmetrial triangle is found' our two trading options beome lear. The first is to trade prie' as it ontinues to range' inside of the triangle. !n our
example we would loo( for the =$>5$2% to ad"ane towards our resistane line urrently residing near the 1.0100 prie handle. :imits should be plaed at
support near 1.0;00. 2tops should be plaed abo"e our resistane line at 1.01.0' reating a fa"orable ris( reward ratio.
(Created using FXCMs Marketscope !" c#arts$
7ption two for trading' is to wait for the =$>5$2% symmetrial triangle to brea(. # brea(out ours when prie would breah our support and resistane lines
reated with our onneted highs and lows. =ntry-s to 6$@ should be plaed abo"e resistane at 1.01.0 and =ntry-s to 2=:: below support at 1.0..0. 2tops
should be plaed between urrent support and resistane at 1.0<00' with limits loo(ing for new highs and lows for a minimum 1:2 ris( reward ratio.
>egardless of your opinion' understanding symmetrial triangles an assist us in our trading deisions. !dentifying support and resistane is the (ey. 7ne these
le"els are found we are free to implement the strategy of our hoosing by setting our entry-s' stops and limit orders appropriately. For additional researh on
tehnial analysis' ! would suggest the following resoures.
In our last lesson we learned about the fag and pennant chart patterns, how to identify
them on a chart, and when the pattern is a bullish or bearish sign. In this lesson we are
going to learn how to identify entry and exit points for potential trades after spotting
these patterns on a chart.
As we learned in our last lesson when you spot a fag pattern in an uptrend this is a bullish
sign as the market consolidation which forms the fag is seen as a pause before a
resumption of the original uptrend. As this is the case when traders spot these patterns on
a chart they will commonly look to enter a buy position. The entry point which they will
commonly use to enter the long position is the breakpoint of the upper line of the fag
which is resistance. The target for the trade is then calculated by measuring the distance
between the start of the up move and the highest point on the fag and then projecting
that upwards. The stop is then placed just below the bottom support line of the fag.
Example of the Bull Flag Trading Strategy:
The strategy is exactly the same for the bull pennant, with one exception. hen trading
the bull pennant the stop loss is placed just below the bottom trend line, in line with the
closest trough.
Example of the Bull Pennant Trading Strategy:
hen you spot a fag pattern in a downtrend it is a bearish sign as the market
consolidation which forms the pattern is seen as a pause before a continuation of the
original downtrend. As this is the case when traders spot this pattern on a chart they will
commonly look to enter a short position. The entry point that is normally used when
trading this strategy is to sell on a break below the bottom support line. The target is then
calculated by measuring the distance between the start of the down move and the lowest
point on the fag and then projecting that downwards. The stop is then placed just above
the upper resistance line of the fag.
Example of the Bear Flag Trading Strategy:
The strategy is exactly the same for a bear pennant, with one exception. hen trading the
bear pennant the stop loss is placed just above the upper trend line, in line with the
closest peak.
Example of the Bear Pennant Trading Strategy:
!o that completes this lesson. "ou should now have a good understanding of the strategies
used to trade fag and pennant patterns as well as how to identify these patterns on a
chart. In our next lesson we are going to look at the triangle chart pattern and how to spot
this on a chart so we can look at ways to trade that continuation pattern. !o we hope to
see you in that lesson.
For more information on this pattern, read Encyclopedia of Chart Patterns, Second Edition, pictured on the right, pages 335 to
34. !hat chapter gi"es a complete re"ie# of the chart pattern, including tour, identification guidelines, focus on failures,
performance statistics, trading tactics, and sample trade. $elo# is %ust a sli"er of the information contained in the &oo'.
Flags appear as small rectangles usually tilted against the pre"ailing price trend and mounted at the end of a flagpole. (f you don)t ha"e
a straight*line price run +the flagpole,, then you don)t ha"e a flag. !he &est performing flags ha"e a long, near "ertical flagpole.
(mportant -esults
(dentification .uidelines
!rading !ips
E/ample
See 0lso

!#o (deal Flag Patterns
Important Bull Market Results* for Flags
1"erall performance ran' for &rea'outs2 3ot applica&le
$rea' e"en failure rate for up4do#n &rea'outs2 456 25
0"erage rise4decline2 2356 175
!hro#&ac'4pull&ac' rate2 4356 475
Percentage meeting price target for up4do#n &rea'outs2 7456 485
!he a&o"e num&ers are &ased on hundreds of perfect trades. See the
glossary for definitions.
9 !he performance results for flags are &ased on the short*term price
s#ing, not the change from the &rea'out to the ultimate high or lo# as
in most other chart patterns.
Flag Identification Guidelines
Characteristic Discussion
Price trend Can &e any direction leading to the chart pattern.
Shape :oo's li'e a small rectangle often tilted against the pre"ailing price trend.
!rend lines Prices mo"e &et#een t#o parallel, or near parallel, trendlines.
3 #ee's Flags are short, less than 3 #ee's long. Patterns longer than that are rectangles or channels.
Flagpole !he flagpole #hich leads to the flag should &e unusually steep and last se"eral days.
;olume trend <o#n#ard trend 815 of the time.
$rea'out =p#ard 545 of the time.
Flag Trading Tips
Trading Tactic Explanation
>easure rule
Compute the height from the start of the price s#ing +point 0 in the measure rule figure to the
right, to the end of the price s#ing +$, and then multiply it &y the a&o"e ?percentage meeting
price target.@ 0dd it +up#ard &rea'outs, to the &ottom of the flag +C, or su&tract it +do#n#ard
&rea'outs, from the top of the flag +C, to get the target +<,.
Aalf staff
!he a"erage mo"e from the trend start to the top of the flag is 225 in 15 days. !he mo"e from
the flag lo# to the trend end is 235 and ta'es 1 days. !he half staff figure to the right sho#s
an e/ample, #ith the flag mid#ay through the trend +mo"e 0 eBuals $,.
Flag tilt
Performance suffers #hen the flag slopes in the direction of the pre"ailing price trend. !he
flag tilt figure to the right sho#s an e/ample of price tilting up#ard in a rising price trend.
Flat &ase
(f the flag appears a&o"e +up#ard &rea'outs, or &elo# +do#n#ard &rea'outs, a flat &ase then
e/pect the mo"e to &e a large one.
!ight flags
0 tight flag performs &etter than a loose one. 0 loose flag is one in #hich price meanders,
po'es outside the trendline &oundary, contains #hite space, or loo's %agged. !he tight ". loose
figure to the right sho#s an e/ample.
Cearly middle
=p#ard &rea'outs perform &est #ithin a third of the yearly high. <o#n#ard &rea'outs do &est
#ithin a third of the yearly lo#.
!hro#&ac's and
pull&ac's
!hro#&ac's and pull&ac's hurt post &rea'out performance.
!he >easure -ule
Aalf Staff
Flag !ilt
!ight ".
:oose
** !homas $ul'o#s'i

Flag Example
!he a&o"e figure sho#s an e/ample of a flag chart pattern. !he price s#ing leading to the flag &egins at 0 and ends at the top of the
flagpole, $. 0 short flag sho#s for a fe# days and then an up#ard &rea'out ta'es price higher.
http244###.%anarps.com4&log4inde/.php42D1D41D4trading*flag*patterns*the*easy*#ay4
Trading Flag Patterns the Easy Way
osted on !cto'er 1() 2010 'y *an +rps, Traders, Tool'ox
-n our prior Blog post on Trading Flag Patterns) we co.ered the characteristics of flag patterns) how to detect and trade flag patterns
using the +rps Flag indicator) and showed you that a confirmed 'rea/out of a flag pattern is an excellent trade setup. +s in many
things) 0timing is e.erything1 in trading too. 2ocating flag patterns) 'rea/outs) and 0putting on the trade1 can 'e tedious wor/) often
re3uiring perfect timing. -n this follow4up Blog we are going to show you how to o.ercome these o'stacles in effecti.ely trading flag
pattern 'rea/outs using two additional tools: the scanning .ersion of the +rps Flag indicator and our new automated Flag strategy.
The Arps Flag Scanner
The most efficient way to locate flag patterns and 'rea/outs is to use a scanner) containing a list of your fa.orite trading sym'ols or
any e3uity and futures list you wish to screen) along with a flag scanning tool. !ur uni3ue and proprietary scanning .ersion of the
+rps Flag -ndicator) designed exclusi.ely for the Trade&tation "adarscreen5 and 6ulticharts5 scanners) pro.ides four columns of
color4coded information) as descri'ed 'elow and depicted in the screen shot that follows) for each sym'ol in which the +rps Flag
indicator has identified a flag pattern. 7ells are color4coded 8reen for Bull Flags and "ed for Bear Flags.
Column 1- Bars Ago
This scanning cell) uni3ue to *an +rps9 Traders9 Tool'ox) displays a running count of the num'er of 'ars since the occurrence of the
flag pattern.
Column 2- Breakout Price
This column displays the price the stoc/ must reach to confirm a 'rea/out of the flag pattern.
Column - Target
This column displays the price at which the rofit Target will 'e achie.ed for the current flag pattern. The price will match the user4
controlled input settings for the chart indicator on the si:e of flags and profita'ility targets you wish to trade.
Column !- " to T#T
This column displays in percentage terms where current price is in relation to the distance from the 'rea/out price to the target
price. The ercent to Target column) 0; T! T8T1) will 'e 'lan/ until a 'rea/out has occurred. +t the 'rea/out price the ; T! T8T
cell will show 0;. <hen price reaches the target) the ; T! T8T cell will show 100;. -f price is half way to the target from the
'rea/out price) for example) the cell will display =0;.
Below is an example of the +rps Flag &canner indicator in action as installed on Trade&tation9s "adarscreen5 platform. To loo/ for
the most recent flag patterns) we dou'le clic/ on the header of the 0Bars +go1 column and the sym'ol list is then sorted with the most
recently4occurring flag patterns at the top. For a daily time frame) 001 Bars +go indicates that a flag pattern has formed today) 011
Bars +go would indicate a flag pattern formed yesterday) and so on. &imilarly) if you were to format the &ym'ol column to display =4
minute data) 001 Bars +go would indicate the current =4minute 'ar and 011 Bars +go would indicate that the flag pattern was
identified on the pre.ious =4minute 'ar.
The colors of the cells are user4defined. For our example) magenta will signify the detection of a Bear flag pattern and light green will
signify the detection of a Bull flag pattern. +fter a flag is detected) a price 'rea/ through the 'rea/out price le.el will turn the flag
cells for that sym'ol to dar/ green to signify a Bull Flag 'rea/out and red to signify a Bear Flag 'rea/out.
$o% to Scan &or Flag Patterns using the Arps Flag Scanner
+s mentioned a'o.e) 'y dou'le4clic/ing on the column header 0Bars +go1) the scanner will sort the most recently detected flag
patterns to the top of the list in descending order) starting with those detected in the current 'ar) 'ar 001. >sing a lin/ed chart
window with the +rps Flag chart indicator applied) we then clic/ on any sym'ol of interest in the scanner &ym'ol column for further
analysis. -n the screenshot 'elow) we clic/ed on the sym'ol +?) +utomatic ?ata rocessing) which formed a Bull flag pattern
yesterday) 1 'ar ago on our daily chart. <e can continue scanning other sym'ols) set a Brea/out +lert on this sym'ol or acti.ate the
+rps Flag &trategy to enter a trade automatically in the e.ent a 'rea/out occurs.
"ecent flag 'rea/outs that still offer excellent entry points are always of interest) so we scroll down and clic/ on a well /nown stoc/)
7isco) which had a Bull flag 'rea/out yesterday and the closing price is only 1; to the rofit Target. -n the lin/ed chart window
'elow) we see that 7isco is 'rea/ing out of a congestion area) or 'ase 'uilding period) and that the pre.ious 'ull flag @ust 'arely fell
short of the rofit Target. The flag has also nicely held all retracements. Based on the chart characteristics) this is a good trade
candidate.
The +rps Flag &canner) in addition to scanning for the most recent flag patterns and flag 'rea/out signals) is useful in trac/ing the
progression and maturity of flag pattern 'rea/outs. -n some cases) li/e with any strong continuation trend) you will want to
participate in a 'rea/out after the early stage. Below the lin/ed window in our scanner highlights the sym'ol 6!) +ltria 7orporation)
that had a Bull flag 'rea/out A 'ars) or A days ago) on our daily time frame and is 2B; to the Target. <ith the smooth upward trend
of this stoc/ and room to go to achie.e 100; of the Target) this is a good 0@ump on 'oard1 candidate.
To inspire confidence to trade flag 'rea/outs) you can also sort on 'rea/outs closest to the rofit Target. Below is a 'eautiful chart of
#?) #nterprise roducts artners) as price stretches as if drawn 'y a magnet to the Target line.
Taking a Position %ith the Arps Flag Strategy
"ather than ha.ing to wait and watch the screen for a Brea/out +lert and enter the trade manually) we can acti.ate the +rps Flag
strategy in a new chart window on any flag pattern we are interested in trading if a Brea/out occurs.
For a Bull flag pattern) the strategy upon acti.ation enters three orders: a Buy &top at the Brea/out rice) a &ell 2imit !rder at the
rofit Target rice) and a trailing stop using the +rps Trender.
Below is a chart of the Flag &trategy applied to sym'ol) 7!) 7onoco hillips.
'nputs
The Flag &trategy has se.eral -nputs that are user4controlled) so that you can customi:e the strategy to your specific trading style and
ris/ tolerance.
1. The +rps Trender is used as a trailing stop to protect against unaccepta'le losses and to protect profit. The user can ad@ust the
sensiti.ity settings to increase/decrease the 0'reathing room1 of the stop.
2. The rofit Target default setting is set at 100; of the length of the Flagpole. &ome 'rea/outs go on to exceed the normal rofit
Target and some fail to reach it. The user can ad@ust the rofit Target to less than 100; or more than 100; of the flagpole length)
such as 120;.
+n input is pro.ided for you to ad@ust the rofit Target to less than 100; or more than 100; of the flagpole length) such as 120;)
entered as 1.2 in the -nput cell.
(. -f) after an entry) the price 'rea/s 'ac/ into the flag) it will exit on an automatic stop on the other side of the flag.
C. -f) 'efore price reaches the profit target) a new flag in the same direction is detected) the new flag will 'e ignored unless the
&trategy roperties input is set to allow more than one trade in the same direction. -f) howe.er) a 'rea/out of a flag pointing in the
opposite direction is detected while in a position) the strategy will re.erse position.
-n conclusion) to trade flag patterns the easy and efficient way) you will need three indicators: the +rps Bull and Bear Flag chart
indicators) the +rps Flag &canning tool) and the +rps Flag &trategy. <e ha.e com'ined these tools in a new +rps Flag toolset. For a
limited time we are offering the +rps Flag toolset) a DA00 .alue) for only DCAE. 7lic/ H#"# to go directly to the online product page.
For 3uestions) please send an email to infoF@anarps.com.
>ntil our next post)
Best)
*an +rps9 Traders9 Tool'ox
?-&72!&>"#
*an +rps9 Traders9 Tool'ox is not an in.estment ad.isory ser.ice) nor a registered in.estment ad.isor or 'ro/er4dealer and does not purport to tell
or suggest which securities customers should 'uy or sell for themsel.es. 7ustomers should always chec/ with their licensed financial ad.isor and
their tax ad.isor to determine the suita'ility of any in.estment.
-t should not 'e assumed that the methods) techni3ues) or indicators presented in these products will 'e profita'le or that they will not result in
losses. ast results are not necessarily indicati.e of future results. #xamples presented in this letter are for educational purposes only. These set4
ups are not solicitations of any order to 'uy or sell. The author and affiliates assume no responsi'ility for your trading results. There is a high
degree of ris/ in trading.