Analyzing and identifying a flag or pennant is easy; trading it is difficult. I can not stress enough how profitable these patterns can be — and how easily you can miss them even in plain sight. When you begin to feel the fear of your account losing money, that triggers a powerful part of your brain known as the limbic system.

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The limbic system controls fear and pleasure. And when your fear sense is triggered, it hyper focuses the synapsis across your brain.

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Things that you would passively identify like flags and pennants are tertiary in their importance when the limbic system is acting in your defense. On the images above, you saw horizontal lines above prior swing highs and below prior swing lows. Placing alerts at those points may be enough to interrupt your primary fear response and allow you to make money on your emotions.

Kirkpatrick, C. Technical analysis: the complete resource for financial market technicians. Bulkowski, T. Visual guide to chart patterns.

Flag Trend Patterns Flag patterns are continuation patterns that occur quite frequently in currency trading. Pennant Trend Patterns Pennant patterns are similar to flag patterns, when the difference is that the trend line during the phase of regression is narrowing instead of parallel.

Rectangle Trend Patterns This pattern is seen with a preliminary trend, followed by a horizontal prize move and finally with the continuation of the previous trend.

Pennant Patterns: Trading Bearish & Bullish Pennants

Posted by Greg Paster. Getting Started? Forex Pro Account Discover a wide range of trading benefits and make your trading experience a more enjoyable and successful one. Apply Now. Free Tools Forex Currency Converter. Forex Pivot Point Calculator. Trading Flags and Pennants Patterns. Flags and pennants chart patterns are primarily known for signaling a continuation of the previous trend. The flag or pennant chart pattern is formed right after a bullish or bearish price movement followed by a period of consolidation. This is where price tends to take a pause before continuing in the original direction of the trend.

Trading the Flag Patterns. A bullish flag is identified by a downward sloping flag, where as a bearish flag is identified by an upward sloping flag. The following chart shows the bullish and bearish flag patterns along with how they are traded. After price starts to consolidate and move gradually lower, look to buy on the break out of the flag. The price objective is expected to be the minimum previous distance of the flag post from the break out price level.

The Figure 2 shows an example of a bullish flag trade example.

Figure 2 above shows a bullish flag example. We notice how the price moved rapidly before entering a period of gradual exhaustion, shown by the number of candles within the flag. After breaking out of the flag pattern, price rallies to reach not only the minimum price objective but rallies to make higher highs. The stops for the bullish flag are placed just at the low prior to the break out from the bullish flag.

Trading with Flags And Pennant Patterns

A bearish flag is characterized by a sharp drop in price followed a period of gradual price congestion moving higher within a channel. On break out of the bearish flag, price then travels a minimum distance of the flag post. The Figure 3 illustrates a typical bearish flag pattern. An interesting point to bear in mind in the above bearish flag trade example is the retest of the break out level.

This retest may or may not happen, but it does remind traders that trading on a retest of a break out price level is always a safe option.