A flag pattern is a short pause after a sharp move, before the trend often continues. It is one of the most common continuation patterns on stock, crypto and forex charts.
The two parts of a flag
- The flagpole: a fast, strong move in one direction, usually on high volume.
- The flag: a small, orderly channel that drifts slightly against the move, usually on lower volume.
Bull flag
After a sharp rise, price drifts sideways or slightly down in a small channel. A break above the top of the flag suggests the uptrend may continue.
Bear flag
After a sharp fall, price drifts sideways or slightly up in a small channel. A break below the bottom of the flag suggests the downtrend may continue.
What makes a flag more convincing
- A clear, strong flagpole, not a slow drift
- A flag that is short in time and shallow compared with the pole
- Volume falling during the flag and rising on the breakout (see volume in trading)
- The pattern appearing in the direction of the main trend
Flag vs pennant
A flag is a small channel with parallel lines. A pennant is a small triangle with converging lines. Both are short continuation pauses after a strong move. See all patterns in our chart patterns guide.
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This article is for education only and is not investment advice. Trading shares, cryptocurrencies, forex and other markets involves risk, including the loss of capital.