DON'T BE MISLED
SLOPING FLAG
PATTERNS AREN'T
WHAT YOU THINK
Contrary to popular belief, all flag patterns are not created equal. While the shape and
size may vary, the direction the flag points can make or break the pattern.
So to make things easy, I've created a simple checklist that will help you stay out of
trouble when attempting to trade bullish and bearish flags.
Be sure to visit http://dailypriceaction.com/free-forex-trading-lessons/sloping-flag-
pattern to read the full lesson.
STEP 1
Identify the Trend
The very first step to trading any flag pattern is to identify a strong trending market
that consists of the following:
Higher highs and higher lows OR lower highs and lower lows
Each leg in the direction of the trend should form at a steeper angle than that
of consolidation
Bullish Trend Bearish Trend
STEP 21
Draw the Flag Pattern
Once you've identified the trend and located the areas of consolidation (exchange of
hands), it's time to begin looking for flag patterns.
However, keep in mind that you won't always find periods of consolidation that
represent favorable opportunities. In most cases, the consolidation won't have
obvious levels from which to trade. But that's okay because you only need one or two
profitable setups each month to make considerable gains.
The four charts below illustrate all four patterns - the bullish and bearish flags as well
as the upward and downward sloping flags. Remember that the sloping patterns most
often break against the prevailing trend while bullish and bearish flags usually break in
the direction of the current trend.
Bullish
BullishTrend
Flag Bearish
BearishTrend
Flag
Bullish
Upward TrendFlag
Sloping BearishSloping
Downward Trend Flag
Note that the upward and downward sloping flags represent reversal patterns while
the bullish and bearish flags signal a continuation of the prevailing trend.
Next, we'll take a look at how to trade each of the four patterns above.
STEP3
STEP 2
Trade Accordingly
Draw the Flag Pattern
Now that you've identified the trend and outlined a flag pattern to determine its angle,
it's time to look for a favorable entry.
Bullish Flag Bearish Flag
Upward Sloping Flag Downward Sloping Flag
See what happened there?
At the end of the day, the way you trade the bullish flag and downward sloping flag
patterns are identical. The same applies to the bearish flag and upward sloping flag.
Remember that the steps above are a mere outline of the most common occurrence in
the Forex market. There are no guarantees of any kind, and there will always be
exceptions to the rule.
Trade well,
Justin
HERE'S WHAT TO DO NEXT
1 2 3
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