Key Takeaways (TL;DR)
• A Flag Pattern is a continuation pattern that forms during a strong trend—it looks like a flag on a pole. • The pole is a sharp, vertical move. The flag is a small consolidation that slopes against the trend. • Entry comes on the breakout from the flag, in the direction of the original pole. • Profit target is the height of the pole, projected from the breakout point.
The Hook
Imagine watching a rocket launch. It shoots straight up with incredible force. Then, for a brief moment, it seems to pause—drifting slightly—before the second stage ignites and it blasts even higher.
That is exactly what a Flag Pattern looks like on a trading chart. And when you learn to spot it, you can ride that second stage all the way up.
What is a Flag Pattern?
A Flag Pattern is a continuation pattern. Unlike reversal patterns (like the Double Bottom), flags do not signal a change in direction. Instead, they tell you that the trend is taking a breather before continuing.
The pattern consists of two parts:
1. The Pole (The Initial Thrust)
A sharp, nearly vertical move in one direction. This shows strong momentum—buyers or sellers are in complete control.
2. The Flag (The Pause)
A small, rectangular consolidation that forms after the pole. Crucially, the flag should slope slightly against the trend direction:
- In a Bull Flag, the flag slopes downward.
- In a Bear Flag, the flag slopes upward.
This counter-trend drift shows that the pause is merely profit-taking, not a real reversal.
Why Flag Patterns Work
Flags work because of market psychology:
- Strong Pole = Strong Conviction. The initial move shows one side is dominant.
- Flag = Healthy Pullback. Early participants take profits. New participants see a buying opportunity at better prices.
- Breakout = Resumption. When price exits the flag in the trend direction, it signals fresh buying/selling has arrived.
The consolidation is not weakness—it is the market reloading for the next move.
How to Trade the Flag Pattern
Entry: Wait for the Breakout
Do not buy inside the flag. Wait for price to break out of the flag's upper trendline (bull flag) or lower trendline (bear flag).
Stop-Loss: Inside the Flag
Place your stop on the opposite side of the flag. If the breakout fails and price re-enters the flag, your thesis is invalidated.
Profit Target: Measure the Pole
Take the height of the pole and project it from the breakout point. This is your minimum profit target.
Example: If the pole moved from $100 to $120 (a $20 pole), and the breakout happens at $118, your target is $138.
Bull Flag vs. Bear Flag
Bull Flag: Forms in an uptrend. Pole moves UP sharply, flag slopes DOWN slightly. Breakout is ABOVE the flag. Entry is a BUY.
Bear Flag: Forms in a downtrend. Pole moves DOWN sharply, flag slopes UP slightly. Breakout is BELOW the flag. Entry is a SELL (Short).
Common Mistakes to Avoid
- Confusing flags with wedges or triangles. Flags are SMALL relative to the pole, with parallel trendlines.
- Entering inside the flag. Wait for the breakout confirmation.
- Ignoring the pole. No powerful pole, no valid flag. The pole IS the trend strength.
Published: February 3, 2026 | Category: Technical Analysis | Read time: 9 min
Pop Quiz
What type of pattern is a Flag Pattern?
💡 Hint: Think about what happens AFTER the flag forms.
Practice: Trading the Flag Pattern
A strong $20 pole forms, then a small flag consolidation. Price breaks out and continues higher.
The measured move target equals the pole height. A $20 pole from the breakout = $20 target. You captured 90% of it!
💡 Key Concept:
The Flag Pattern = Strong Pole + Consolidation + Breakout. Enter on the breakout, stop inside the flag.