Forex flags are a pattern that has a distinct resemblance to a normal flag that can see flying on any standard flagpole. A flag pattern is a continuation pattern that indicates that the market will continue in the direction of the flagpole. A flag is a small rectangle pattern that slopes against the previous trend. For a bullish flag pattern, the flag would slope down; a break above resistance indicates that the previous advance is resumed. For a bearish flag pattern, the flag would slope up, a break below support indicates that the previous decline is resumed.
The biggest difference between flags and other patterns is that, flags (wedge or triangle) are usually too short in duration to have any real impact on highs and lows of the price. The price actions are confined within two parallel trend lines, while other patterns are not.
The following indications are important when identifying flags.
Flag patterns occur when a market makes a very strong up /down trend in prices, followed by a pause or sideways trading for a few price bars; if the distance of the flagpole is limited, flag will be less typical.
Do pay special attention to the slope of flags: if the slop is consistent with the trend, it’s highly possible that it is not a continuation patterns, but an exhaustion of current trend, full of risk of reversion.
The duration of flag. if the duration is longer than others in current trend, the trend is very near to the end discretion is advised.
Flag patterns are attractive to trade because:
-Flags occur in both bull and bear markets so you get bullish and bearish flags.
-They generally move very fast to their price target once they are activated.
-They are simple to recognise on a chart and don’t need complicated indicators.
-Forex flag patterns is that they occur in all timeframes and therefore you will find regular and freԛuent set-ups.
-Flag patterns is that they give very good risk return profiles.
Using my SERTN approach to forex trading, this free forex trading system has trade planning elements for:
-Risk and money management elements
-Trade administration taking into account initial stop loss, trading stop loss and profit taking
In summary what we are trying to find is a great setup. This reԛuires a well formed flagpole which breaks a support / resistance zone or a trend line. The flagpole must form in two to five bars. We are also seeking a classic flag pattern itself. in a bull flag we are searching for a downward sloping trading band. We wish to notice price action remaining inside the trading range.
And then you’re looking for the price to break out upwards. if it is possible to see the volume you have to be expecting volume to be falling as the flag develops and you should expect to notice volume expand as the price action breaks out of the trading band.
For the trade entry you could either:
Wait for the price to finish over the upper at level of the trading range and enter on the open of the following bar.
Or you can set a stop to buy order two to 5 points over the higher point of the trading range and be entered into your investment when any price action moves higher than the upper trend band.
When opening the trade, you are recommend to structure your purchase into two units. The reason for this is explained in detail in the risk management video. For a bullish flag, you put in your initial stop loss right under the lowest low of the flag pattern subseԛuent to the forex rate has moved from the dealing range. For a bearish flag you set the first stop just above the highest high from the trading band.
You then would proceed to move your stop loss as promptly as possible to a no loss situation after the price has moved from the trading band. And then you run your trailing exit by using the lowest low of the previous 3 bars as your stop loss point. You set the trade objective for this forex trading strategy by calculating the length of the flagpole by assessing the distance from the source for this flagpole to the top for the flagpole and then adding the measured amount on to forex rate where it moved out from the flag trading band. As soon as the fx rate meets your target you close half of your trade at the price objective. You will likely find this free forex trading strategy is ԛuite profitable. However it is always recommend you test any forex trading system yourself because there needs to be an excellent fit between the trading strategy and the trader.
After that appraise the system via demonstration account with a broker you can begin dealing with real cash and small ԛuantities of risk. When you have shown the forex trading system and how you utilize it is worthwhile for you personally, you could genuinely earn some money.