Bearish Flag Pattern Explained with Powerful Trading Plan

This compensation may impact how and where products appear on this site . SuperMoney strives to provide a wide array of offers for our users, but our offers do not represent all financial services companies or products. Customers who want to use their accounts for day trading must obtain the broker-dealer’s prior approval. Customers must also be aware of, and prepared to comply with, the margin rules applicable to day trading. The flag must retrace upwards with at least two smaller price waves. If we see a retest of prior price levels, we’re concerned. When we look at these patterns, there are some specifics to keep in mind, and these help us make better choices and prevent big losses.

Read on to learn more about the bear flag and how to integrate it into your trading strategy. Since bull and bear flag patterns represent that an asset is overbought or oversold, respectively, they’re often combined with various technical indicators, like the RSI. There are a number of differentchart patternsthat traders have to watch out for to optimize their trading strategies.

Bearish Flag Pattern Explained with Powerful Trading Plan

As with the bull flag, a clean move to the inside of the flag invalidates the Bear Flag Pattern. In a bear flag pattern, the support and resistance levels run slightly parallel to each other. This doesn’t mean that the support and resistance lines won’t slope at all.

Hence, do remember the pattern goes “live” only when the breakout takes place. In a textbook example, a pullback should end at around 38.2% Fibonacci retracement. The shorter the rebound, the stronger the downtrend is, and the stronger the breakout is expected to be. The buyers use the consolidation to try and weaken the momentum of the sellers, who are in control of the price action. On the other hand, the bears take a step back to consolidate the most recent gains and prepare for another push lower. Day trading is subject to significant risks and is not suitable for all investors.

How to Trade Crypto With a Bear Flag Pattern

In the Bearish flag pattern, there are two take-profit levels. Close the half trade at the origin of the impulsive phase and close the rest of the trade at the 1.272 Fibonacci extension level.

The initial buying pressure in a bull flag pattern gets many other traders in a frenzy and ‘fear https://www.bigshotrading.info/ of missing out’ zone. A breakout – the breakout is the final piece of the bearish flag patterns.

How to Plan a Trade Using Flag Patterns

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. In our example, we are presented with both standard entry options after the breakout occurs. The first option results in the opening of a trade as soon as the breakout candle closes below the flag. Therefore, it’s advised not to trade flags that have long and choppy consolidation phases, as well as those that extend higher than 50%. SpeedTrader provides information about, or links to websites of, third party providers of research, tools and information that may be of interest or use to the reader.

If you want to ride the medium-term trend, you can trail your stop loss with the 50MA. Often when you short the Bear Flag, the price is usually below the 20MA.

Spotting the Bear Flag Chart Pattern

The retracement shouldn’t exceed the 50% Fibonacci level, otherwise, the bearish crypto trend is fragile. The flag pattern isn’t as well-defined as the other examples, but it still gives us a nice channel with an accurate measured objective.