Giles Coghlan LLB, Lth, MA
Financial Source
According to Thomas Bulkowski, one of the most profitable technical patterns is the high and tight flag, breaking higher. According to Bulkowski, when properly recognised, it can reach a target up to 90% of the time. So, here is what you need to look for to recognise them.
Recognising the flag pattern
Here are the steps to recognising the pattern:
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First of all, you need to witness a steep and sharp price trend (ideally over 90% gain).
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Ideally, this price move should be around 45 degrees.
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Then you need to see the price from a small channel that resembles a ‘flag’ pattern.
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The best performance comes when the flag slopes away from the preceding trend.
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Flag formations should form over a few short days – ideally, less than 15 days.
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Use the measured rule to aim for your target. So, the height of the move preceding the ‘flag’ formation is the measured target from the breakout of the pattern.
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Use a trailing stop to lock in profits.
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The trade entry is simply the break of the pattern and stops can be placed on the other side of the pattern.
Here is a look at what the Flag pattern should look like:
The logic
The most likely reason the flag pattern works is that by definition you are already entering a trending market. That is a prerequisite for finding the pattern. This pushes the odds in your favor and, when combined with a trailing stop, you can see why some traders focus on trading the flag and pennant pattern in isolation.
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Editors’ Picks
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GBP/USD softens to near 1.3600 as BoE hints further rate cuts
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USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold holds gains near $5,000 as China's gold buying drives demand
Gold price clings to the latest uptick near $5,000 in Asian trading on Monday. The precious metal holds its recovery amid a weaker US Dollar and rising demand from the Chinese central bank. The delayed release of the US employment report for January will be in the spotlight later this week.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Bitcoin Weekly Forecast: The worst may be behind us
Bitcoin price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
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