What is a Flag Pattern?
Flag
Forex Trading Glossary
Quick Answer: A flag is a counter-trend consolidation that follows a sharp move and typically breaks in the direction of the original trend.
What is a Flag Pattern?
A flag is a continuation pattern that forms after an impulsive move. Price consolidates in a tight channel that slopes against the prevailing trend before breaking in the original direction.
Structure of a Flag
- Flagpole: The sharp preceding move that confirms momentum.
- Parallel boundaries: Price oscillates between two lines that often tilt slightly counter-trend.
- Volume behavior: Activity contracts during consolidation and expands on the breakout.
Validate with Context
Flags work best within strong trends and near clear support or resistance. Avoid trading them inside choppy ranges.
Trading a Flag
- Identify the pattern on multiple timeframes to ensure the structure is clean.
- Wait for a decisive breakout with expanding volume or volatility.
- Place stops beyond the opposite boundary to give the flag room to play out.
- Project targets using the flagpole height or nearby measured-move objectives.
Related Terms
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