Description: The flag represents a brief pause in a dynamic market move & one of the requirements for a flag pattern is that it should proceed by a sharp and almost straight-line move. It represents situations where a step advance or decline has gotten ahead of itself, and where the market pauses briefly to "catch its breath" before running off again in the same direction.
Construction of Flag & Pole pattern: The flag resembles a parallelogram or rectangle market by two parallel trendlines that tend to slope against the prevailing trend. The flag usually occurs after a sharp move & represents a brief pause in the trend. The flag should slope against the trend. Volume should dry up during the formation & built again on the breakout.
How to trade flag and pole patterns: The sideways period is often followed by another sharp rise. This is where the trading opportunity comes in. Once the flag pole and a flag or have formed, traders watch for the price to breakout above the upper flag/trend line. When this occurs, enter a long trade.
Conclusion: 1-Flag patterns are a commonly used technical analysis tool and majorly a choice of breakout traders and swing traders. 2- Flag is formed when there is a minor profit booking in either an uptrend or a downtrend. 3- The pole is formed by a line that represents the primary trend in the market. 4- It is important that flags are preceded by a sharp advance or decline.
At the outset I would like to thank you for sharing your knowledge. I'm holding TATACHEM with a stop loss of 754 on WCB. Is it right or shall I hold the stock in longer time frame which would eventually lead to lower stop loss. Pls suggest 🙏
Indrajit08
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@auro.saha86 Stick to your initial Stoploss. Price is still consolidating in flag pattern, Re-enter "ONLY"on a fresh breakout .
Indrajit08
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Remember:- A breakout trade will work almost right away from the start , if breakout happens with huge momentum and then you see doji candles or hammer than there is a problem with follow up. A bullish breakout must always be accompanied by a good follow up ,else it cannot sustain. Bullish breakout needs good bullish candles , NOT dojis.