Check points:

1. Reliable flags appear during steep,

quick price trend.

2. The price action for flag is bound by

two parallel trend lines.

3. The volume is usually goes down

during formation of flag.

Signal strength points:

1. Bullish Flag perform better in

prevailing upward market trend.

2. Tall flags perform better than short

ones.

3. Throwback or pullback after breakout,

hurts performance.

4. Flags with falling volume trend

Psychology:

The shape of the flag not as

important as the psychology behind the

patten. During the strong upward rally

formation of bullish flag shows that the

stock refuses to drop. The breakout from

flag often results in powerful upward

move. The target of this move is

generally same as the size of the pole.

It is also important to know that these

patterns work same in reverse and

known as Bearish Flag.

Study Examples:

Let's study some real-life examples for

BullishFig. 1.1 Bullish Flag

In above example (fig.1.1) we can see

strong uptrend in progress, then

Consolidation phase OCcurred, this

created the bullish flag pattern. Notice

the volume is falling during the formation

of the flag. Look at the strong breakout

candle, it shows that bulls have taken

control again with strong confidence.

This pattern breakout then moved the

stock price to the new high. Target is

approx. same as that of siFig. 1.2 Bullish Flag Failure

Above example shows bullish flag failure

(fig.1.2) the price move didn't reach the

expected target. Look at the breakout

candle. The breakout candle is a doji.

So, if you Know candlestick signals (if

don't please check out my

Candlestick Signals & Patterns) you

must be alert at breakout because the

doji represents indecision and this

breakout is not so strong. You should

be out of the trade if you see any

weakness in the price and look for

another trade opportunity where

probability of winning the trade is

greater or you can simply put a safety

stoploss.ze of pole. flag pattern.perform better.