What is the Flag Formation?

Flag formation is one of the formations indicating the continuation of a trend. It is right next to the flag formation one of the clearer formations. Thanks to it, it is possible to clearly determine what trend will prevail. It often occurs in the middle of strong price movements. It is usually determined by two vertical lines.

How to recognize a flag formation?

The first sign, will be a strong breakout, practically a vertical price movement, in which no major corrections will occur. Such breakout should be followed by at least four turning points, i.e., a double decline and a double rise, which will alternate, so that then there will be a breakout, which should be at least equal to the one that started the formation. This is a strong buy and sell sign.

How much time does it take to form a flag formation?

As in the case of the pennant formation, this will range from a few sessions, to as long as 3 – 4 weeks. This time should not be prolonged, and if so will be, this movement can be considered suspicious. Usually this is a short-term formation.

How often does a flag formation occur

This is one of the rarer formations, but a good trader will be able to use it efficiently. It sometimes even requires immediate moves to ensure profits or protect against losses. It is also so popular that it is recognized by most trading programs.

How should trading volume behave with flag formation?

In the case of a flag formation, the volume should clearly decrease. This is a regularly observed behavior, which is one of the characteristic factors indicating the existence of this formation.