In day trading, when the consolidation occurs, it always determines the next movement of the market. If the consolidation occurs only for a limited period, how can a trader verify that the next move in the market.
Bullish Flag Pattern
The Bullish Flag Pattern is one of the trading patterns that occurs after the short-term consolidation period. When this pattern appears, it is possible to have a sharp uptrend. After the formation of this pattern, the price experienced a rapid rise. However, the price went sideways for a limited period but resumed an upward trend. The flag always formed with 45 angle and when the upper trend line is broken, it resumes the uptrend.
The appearance of this pattern suggests a possible uptrend, but it should be confirmed with other indicators like volume and others. When you encounter this situation, you should use a stop loss below the lower trend line.
Bearish Flag
This pattern is formed after the sharp downward trend followed by the short-term consolidation. Like the bullish flag, this pattern is also the continuation of the downward trend, and after the formation of this trend, the price moves downward more quickly.
When you encounter this trend, you should take a short position, but before taking any decision, you should use other indicators and measures.
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