A flag is a consolidation pattern during a dominant trend and entails the price rebounding off 2 short term parallel trendlines.
There is very rarely a 'perfect' flag shape, but what we are looking for is price consolidation.
The flags can be in the shape of pennants, triangle or rectangular, but normally we do not like bull flags that are upward sloping or bear flags that are downward sloping as there is no clear entry point.
The Flag Trader TradeFinder will display results where the stock price has been moving up/down for a few days, followed by at least 3 days of price consolidation.
Results tables will also highlight Flags by showing a flag icon and highlighting the ticker (Blue for Bull, Red for Bear).
Related Articles
What do you consider a "properly constructed breakout?"
What we mean by that is a breakout that is preceded by a flag pattern, consolidation, or a clear support (or resistance) area. This should be accompanied by at least a couple of the Big Money Footprints For any trade we need to know exactly where ...
How do we know that a flag has formed fully and that a breakout is imminent, i.e how many candlesticks denote a typical flag?
The flags (consolidation patterns) we like are generally 3-4 bars (days) long. Sometimes they can go for a bit longer, but that’s a good ballpark. We’re looking for easily recognisable, neat, and compact flags, where the difference between entry and ...
If the length of the flag starts to approach or exceed the length of the pole then its probably time to consider moving on?
We typically like the flag to be a consolidation where the bars are tighter than what has gone on before. This description would seem to refer to a range bound stock forming a channel.
If the entry price of the flag or consolidation is hit, but then the market just starts moving sideways not hitting either entry or stop loss. Is there a point where I can say this is not the typical flag trader trade and just exit?
Yes, it's typically where it stops being a flag or consolidation, becomes range bound, and other opportunities look better. Also, watch to see if the OVI remains in the direction of the dominant trend, and the presence of Big Money Footprints, ...
What does the OVI do?
Simply put, the OVI measures the flow of the big, smart money in the markets. It does this by monitoring the activity between buyers and sellers of options. You do not need to know anything about options trading to use the OVI. But by looking at ...