Bull Flag and Bear Flag Patterns: The Ultimate 2023 Guide

Today I’m going to show you exactly how to trade bull flag and bear flag patterns for massive (consistent) profits.

You may be wondering, are these flag patterns even worth it?

There was a time when I traded nothing but channels, including bull and bear flags, and I was quite profitable.

So if you want to skyrocket your trading performance this year, you’ll love the actionable steps in this complete guide.

Let’s dive in!

What Are Bull and Bear Flags?

The first thing to understand about flag patterns is that they represent consolidation.

As such, they usually form after an extended uptrend or downtrend.

A bull flag forms within an uptrend, while a bear flag develops in a downtrend.

Simple enough, right?

What may be a little odd is that a bull flag forms “away” from the trend, and the same goes for the bear flag.

We’ll get into some examples below, so don’t worry if that’s confusing for now.

Now that you know what bull and bear flag patterns are, let’s dig into their characteristics.

Bull and Bear Flag Characteristics

1. The flag pole
2. The flag
3. The continuation

The illustration above shows a bullish flag pattern.

The bear flag has the same components, so let’s take a look at each one in detail.

The Flag Pole

This is the initial move in price.

It can be represented by either an uptrend or a downtrend.

A flag pole in an uptrend would result in a bear flag, while a flag pole in a downtrend would result in a bear flag.

The angle of this move is irrelevant in terms of the validity of the flag pattern.

The distance of the flag pole is what we use for the measured objective.

The Flag

The flag formation is the key to this pattern.

It’s where the market takes a “breather” within the trend and consolidates for the next move.

The length of consolidation isn’t as important as the depth of the retracement, which shouldn’t be more than about 50% of the initial move.

The Continuation

At this point the market has finished consolidating and is now trending in the original direction.

Using the distance we calculated above for the flag pole, we now have a measured objective for a possible target.

If this is a little unclear right now, don’t worry, it will all make sense once you see the illustrations below.

Flag Pattern Examples

Now that we have a good understanding of the different components, let’s take a look at a few real-life examples.

GBPUSD Bullish Flag

Notice in this example how the continuation is the exact same length as the flag pole.

The distance for the flag pole is measured from the swing low to the swing high of the flag pattern.

Similarly, we measure from the swing low of the flag pattern to the swing high of the continuation.

In the example below, both represented an equal distance of 500 pips.

 AUDCHF Bullish Flag

A bit different from the GBPUSD flag above, this bullish flag on AUDCHF extended almost an equal distance to that of the flag pole itself.

Furthermore, the flag pole was approximately 260 pips while the continuation only resulted in a 230 pip rally.

So while the two were very close in terms of distance traveled, there was a slight difference.

EURCAD Bearish Flag

Last but not least we have a bearish flag pattern on EURCAD.

Just like the bullish flags above, this bearish flag has a flag pole and continuation that are both equal distances of 580 pips.

The flag pattern isn’t as well-defined as the other examples, but it still gives us a nice channel with an accurate measured objective.

Summary

I hope this lesson has provided you with a blueprint of what to look for when identifying bullish and bearish flag patterns.

We’ll get into how to trade these price action patterns in a later lesson.

For now, just focus on being able to identify these patterns – they occur all the time and can be a powerful asset in your trading toolbox.