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Chart Pattern – How to use the FLAG Pattern

A chart pattern used by all traders is the Flag Pattern. To use this model you need to look for a strong trend and follow it since it started, usually at the beginning of a reversal, but we suggest not to Buy or Sell at this point. It’s better to wait in order to control if the market trend resumes the reverse direction.

As you can see in the image below in the currency pair AUD / MXN  the price increase, then suddenly drops and then again rises steeply to the top. At the point where we have the second increase is the point where we have enter into the market.

flag

If we draw a straight line on the trend line and two parallel lines along the range you get a pattern in a FLAG  shape. The entry point is the point where the price breaks through the upper parallel line. As you can see in the graph on the right side of the flag, the price continues to climb higher compared with the beginning of the Flag. If you enter the point after the flag you will be able to follow the trend for much longer than you could do before. Obviously this does not happen only on the upward trend, but it can also occur in a downtrend.

In fact, in order to observe the opposite condition we can just look outside of the triangle where we observe downtrend orders, then a tracing of the range, and then a little more forward continues a downward trend. It’s mandatory to keep in mind that this type of trading requires patience and the prices should be observed for a long period of time.

All this is not generally suitable for scalping online but can be used by traders of binary options that can patiently wait for the best entry point. Also, remember that you can also use other indicators to help identify a trend or a breakout, especially the RSI indicates when a couple is overbought or oversold. If a pair is overbought or oversold, this will often be the prelude to a reversal.

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