What is Bull Flag Pattern in Trading

At the beginning of their career, many traders and investors struggle to make sense of technical analysis patterns — many factors are involved, for example, how it appeared or at what level it was formed, economic calendar, etc. In the bull flag patterns, for instance, the flag pole is formed first. Technical analysis chat patterns have many such nuances, but it’s really not as complicated as it seems at first glancey.

How does bull flag pattern work?

Bull (bullish) flag is one of the classic uptrend continuation patterns. The essential characteristic of a bullish flag pattern is a short downward consolidation, after which the instrument shows a sharp rise. In the chart, the bullish flag looks like a narrowing triangle or rectangle, which demonstrates the decrease in volumes and indicates that market participants are locking in their positions. This allows beginner and experienced traders to find a good entry and limit levels - after the narrowing of the range, a bullish pennant of the upper side of the triangle will follow.

In the picture above you can see the EURUSD Forex trading pair with clearly visible elements of the bullish flag pattern

How to identify the bull flag chart pattern

It's crucial to be careful when identifying the bullish flag in the chart and when you trade the bull flag — several important factors must be present to form this pattern. The bullish flag pattern must meet the following criteria:

1.First, an impulsive bullish trend — the flagpole — is formed.
2.Downward consolidation develops next, which is represented by the bull flags structure itself.
The short-term downward price moves are by 38% at most.
You can open buy trades when the upper limit of the descending channel is broken.