Bull flag pattern

Why it works

A strong pole shows aggressive buying. A shallow, quiet pullback shows that sellers cannot push price back much: buyers are only resting. When the flag breaks, the original buyers return.

Thomas Bulkowski's pattern statistics show that flags are among the more reliable continuation patterns when they are short and the trend before them is strong.

The rules

Setup

• A pole: a fast move of at least 3× ATR in a few bars.
• A flag: 5 to 15 bars drifting slightly down or sideways, retracing less than 50% of the pole, ideally on lower volume.

Entry

• Buy on a close above the upper line of the flag.

Stop loss

• Below the flag low.

Exit and management

• Measured move: the height of the pole added to the breakout point. Take partial profit at 2R.

Filters that improve it

• Skip flags that retrace more than half the pole.
• Skip if the flag takes much longer to form than the pole.

Worked example

Illustrative gold example on 1H: a pole from $2,330 to $2,370. The flag drifts down to $2,355 over eight bars. Price closes above the flag line at $2,364: buy, stop at $2,353, target $2,364 + $40 = $2,404.

Illustrative numbers, not a recommendation.

Common mistakes

• Calling any pullback a flag even when it is deep and slow.
• Buying inside the flag before the breakout.

How to practise it

In Candlemind draw two parallel lines on the flag and only enter on a close beyond the upper line.

Pre-trade checklist

1. Strong pole (3× ATR or more)
2. Tight flag retracing less than 50%
3. Lower volume in the flag
4. Close above the flag line
5. Measured-move target

Frequently asked questions