Topic: How to use the Bear Flag pattern and what to look for? - page 2. (Read 277 times)

Personally I like trading the breakout of a Flag pole however I prefer price retouching or pullback to the outer line of the flag pole and watch out for Price Action for possible price continuation something like exhaustion on a bullish or bearish candle that touched the line before pulling the trigger for a possible long or Short order with reference to the 1 hour or 2 hour timeframe definitely anot daily timeframe which I believe trading it breakout will lead to a massive drawdown if the price undergoes correction, however multi timeframe analysis is also very helpful to determine the trend of the market.

I like the fact that people are developing new strategies to help boost their trading experience with the use of different patterns base on their research work on the effective use of alternatives to trading indications used over time, one can use many approach just to arrived on same accurate result for trading purpose and we just have to certainly create a trial for the use of the new one from the existing ones for more successful result while tracking on price speculations.

Many times, the market moves oppositely to what it should move based on patterns which are used by most of market participants. If the market moves exactly like what most of us think, most of us will be rich. Many years, in all markets, most of people lose money and only very intelligent investors, traders get richer.

Don't trust patterns and indicators which are set up by Market Makers to help them richer and make us poorer. Focus on fundamentals and have a wide overview, long term plan are better.

Good info. It is nice and clean. I have saved the article and the other ones. Your blog seems pretty cool! About the bear flag pattern, the diminishing volume during the formation is a must?   

I also like to say briefly that when there is breakouts , it also depends on the strategy of the trader or type of trader. Like if a trader is a daily trader, he should be careful of the breakout and not be carried away because at every breakout there is correction and such correction may take time to continue the breakout position. Some traders like swingers or daily trader may feel no reversal after the breakout and they may be caught on the web of correction if they don't use stop loss. Breakout only means a directional position but not that it may not change from time to time within the moment.

I appreciate the positive comment, thanks.

Every trader understands that it's impossible to predict market moves with 100% certainty. However, using technical indicators can help us make better decisions. These indicators and patterns give us clues about how buyers and sellers behave in the market. For instance, with a bear flag, when prices consolidate and volume is low, it means neither buyers nor sellers have control. But when there's a breakout, it suggests that sellers are gaining momentum again, giving us an idea of how to position ourselves.

The concept of events repeating themselves in the market is often attributed to the belief that human psychology plays a role in shaping market dynamics. Market participants tend to exhibit similar patterns of behavior when faced with similar market conditions, leading to the repetition of certain patterns over time.

You can also check out the Bulkowski statistics here about flag patterns, in terms of breakout, throwback, etc stats. He has one of the most extensive research and tests on chart pattern and where he shared all the stats he got. https://thepatternsite.com/flags.html

Thanks!

Precisely, the thing is using chart patterns alone won't give you the best result for predicting market moves. That is why it is always advisable to use chart patterns in conjunction with other technical indicator for the best results. We can think of chart patterns as some kind of essential piece of a trader's toolkit.

For the picture, I would say that, it is a flag pattern because flag patterns are very short consolidations with a flag a pole (the sharp price drop right before the pattern forms) and it works best on 4h, 1H and Daily.  Flag patterns are one of the most frequent chart patterns that form and they need to be watched carefully and always should be looked for confirming factors, such as volume and other technical indicators

I am not sure if I will ever understand the seriousness of trading view and technical analysis but for the hardcore trader and new comer this article is just great help. Just lovely how you have extracted detailed info about it. I think I have seen some other thread in similar ways, may be it was you only and the cleo Website.

I don’t really believe in TA to the fullest. The pattern you shown, how is it based on and what are the “chances” that it will bounce back at particular period of time as shown in the trading charts above?

Let us say I learn the TA to fullest of my knowledge. How do you concur about the events repeating themselves so keenly?  Consider me curious and naive in TA.

Yeah but in my opinion, some patterns need other indicators that support them sometimes it fails to use only pattern, especially in a lower timeframe you also don't want an ending like this image below.



trade is crazy tho  anyway good information

Chart patterns can be valuable tools for traders to understand market behavior and predict future price movements accurately. They can enhance your strategies, profitability and allow you to make more informed trading decisions. I summarized another article here, this time for the bear flag pattern - one of the most common and used one by traders. Here is the source, where you can find also other chart patterns.


What is the Bear Flag Pattern:

The bear flag pattern is a technical analysis pattern that occurs during a downtrend. It involves two sharp price drops separated by a brief consolidation phase. The pattern suggests that a further bearish move is likely, and it is confirmed when the lower support trendline is broken. This leads to another downtrend with prices falling towards the low of the formation.




Is the Bear Flag Pattern a Continuation or Reversal Pattern?

Bear flag occurs often in the market and it is generally considered to be a continuation pattern. It signals a pause or consolidation within a downtrend, where the bears take a brief break, and prices move slightly upward in a rectangular shape before continuing the downtrend. The breakout often occurs with a significant trading volume. Traders should look for either a break of important support or a pullback.




How to Identify a Bear Flag Pattern?

The bear flag pattern is a chart pattern that occurs during a downtrend. Traders should look for a fast and sharp decline in price (called a flagpole). This is followed by a brief period of consolidation (known as a flag), which is surrounded by two parallel upward-trending lines.

In bear flag formation, the volume is often in a downward trend. The breakout from the flag pattern typically occurs with a significant volume and confirms the continuation of the downtrend. Although this is not always the case, flag patterns with a diminishing volume or light breakout volume usually perform better.



During the consolidation phase, traders watch out for the price breakdown through the lower trendline and make a new low since it shows the bears are in control again to push another decline.




Where to Place Target and Stop Loss?

The target can be placed by measuring the distance from the start of the sharp price movement (the pole of the bear flag) to the point where the pattern’s upper trend line ends.
The stop loss can be placed above the upper trend line of the pattern. And you should aim for a risk-to-reward ratio of at least 2R. (for every 1 unit of risk you expect 2 units of reward).


How to incorporate the Bear Flag Pattern into your automated trading strategy?

To include the Bear Flag Pattern in your automated trading strategy, you can identify the pattern on the cleo.finance chart and use the pattern's lines as your automated entry and exit conditions, along with your stop losses and take profits. Then automate it.