What it looks like
The pole is a fast, strong rise over a few candles. The flag is a short rest of several candles that drift slightly down or sideways in a narrow channel, giving back only a small part of the pole. The pattern completes when a candle closes above the top of the flag. The pole's length is from its start to its high.
What it means
A sharp rise, then a short rest that barely gave anything back. A rest that shallow says buyers are still there and few holders wanted to take profit. When price closes back above the rest, the next leg of the rise has started. It is one of the most common continuation patterns in trending markets.
How to trade it
- 1
Measure the pole and mark the top and bottom of the flag.
- 2
Confirmation: a candle closes above the top of the flag.
- 3
Entry: buy at that close.
- 4
Stop: below the low of the flag. Example on gold: pole from 4,000 to 4,030 (30 points), flag drifts to 4,021, close above at 4,029. Buy at 4,029, stop at 4,019, a 10 point risk.
- 5
Target: the pole length from the break, about 4,059.
A close back inside the flag after the breakout candle has closed.
Where it works best
In strong trending sessions on 5 minute to 1 hour charts on gold and indices, when the pole comes with real activity.
WickSpeak finds bull flags automatically and names them on the candles that made them. The note explains what the flag is, how to trade it and that a close back inside the rest proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Trading a flag that gives back most of the pole, which is no longer a shallow rest.
- Buying inside the flag before the break.
- Measuring the target from the bottom of the flag instead of from the break.
Related patterns
Questions traders ask
How do you trade a bull flag?
Wait for a close above the top of the flag, buy that close, and put the stop below the flag's low. The usual target is the length of the pole from the break.
How long should a bull flag last?
It should be short compared with the pole, usually a handful of candles. A rest that drags on for a long time is closer to a range than a flag.
What is the difference between a bull flag and a pennant?
Both follow a sharp rise. A flag drifts in a small parallel channel; a pennant tightens into a small triangle.
What proves a bull flag wrong?
A close back inside the flag after the breakout. That means the break did not hold and the rest is not over.