A strong impulse, a tight pause, then continuation.
A flag or pennant is a tight pause after a strong impulse (the pole), and it usually resolves in the trend direction. This page shows how to draw the pause as a channel, project the measured-move target from the pole, and enter on the sweep of the flag low instead of being shaken out by it.
A complete bull flag trade. A strong pole, a tight downward flag channel, a quick sweep of the flag low, then a continuation breakout that runs a measured move equal to the pole.
PATTERNS·~9 min read·Updated on ·Art of Trading
01 Flags, pennants, and the pole
A tight pause after an impulse usually continues
Flag = parallel drift · pennant = a coil · both follow a pole
A market that runs hard and then pauses without giving much back is usually resting, not reversing. Flags and pennants are the two shapes of that pause; they differ only in outline.
The move that starts the pattern is the pole: a fast, near-vertical run driven by one-sided orders. After a run like that, the market rarely reverses on a dime. It drifts sideways or gently against the trend while early buyers take profit and new buyers step in. That drift is the flag. If the drift tightens into a point instead of holding a parallel channel, it is a pennant. Same structure, different outline.
Bull flag. The pause is a tidy downward-sloping parallel channel: price leaks against the trend but stays contained.Bull pennant. The same pole, but the pause coils to an apex: lower highs and higher lows squeezing together before the break.
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You are trading a move that already proved itself
A flag or pennant is a continuation pattern. The pole proves the trend is strong; the flag shows it resting. The trade is the resumption of that proven move, not a guess at a new one.
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A flag must stay tight and shallow
A pause only counts as a flag while it stays tight and shallow. The hard limit: a pullback that retraces more than about half of the pole invalidates the pattern (chapter 4 covers the rule).
02 Pole, flag, breakout
The three parts: pole, flag, breakout
The pole sets direction and size, the flag is the rest, the breakout is the trigger
Every flag trade has three parts, and each answers one question: the pole (is the trend strong), the flag (is the rest healthy), and the breakout (has the trend resumed). Label all three on the chart before you trade.
The three parts. The pole is the impulse that sets direction and size. The flag is the contained pause. The breakout is the exit from the flag in the direction of the pole. A brief dip through the flag low just before the break is normal, not a failure.
Part 1
The pole
A strong, fast move in one direction. It should look decisive: big bodies, small pullbacks. The pole sets both the direction you will trade and the height you will project for a target.
Part 2
The flag
A tight counter-trend drift, drawn as a channel. A bull flag slopes gently down; a bear flag slopes gently up. Against the trend is healthy; with the trend can mean the move is running out.
✓
No clean pole, no flag
Before you take the trade, point to all three parts: pole here, flag here, break here. If you cannot point to a clean pole, you have a range, and range tactics apply instead.
03 The measured-move target
Project the pole height for the target
Measured move = pole height added to the breakout point
A flag tends to resume for roughly the same distance the pole travelled. Measure the pole, add that distance to the breakout point, and you have a target, the measured move, before the move even starts.
Measured move. Measure the pole from its base to its high, then add that same distance to the breakout point. That projected level is your first target. Price often overshoots it, but it is where you plan to take profit and where risk-to-reward is decided.
Measure the pole. From where the impulse began to where it topped out. That distance, in points or percent, is your ruler.
Find the break. The point where price exits the flag in the trend direction. This is where you start the projection.
Project the same distance. Add the pole height to the break. That level is the measured-move target.
Check the reward. Compare the distance to target against the distance to your stop. If the target is close and the stop is far, skip it.
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The measured move is an estimate, not a guarantee
Use it to judge risk to reward and set the first target, then let price and structure decide whether to trail, take partials, or exit early.
04 Drawing the flag channel
Draw the flag as a channel, then a zone
Two touches draw each rail, a third confirms it
Draw both rails of the flag as a parallel channel, and anchor the channel width to the range where the flag began. A single line along the highs gets pierced by one wick and fires false signals.
One line (fragile). A single line along the highs looks clean until one wick pierces it and fires a false break. You are stopped out, then the real move goes without you.Channel as a zone (robust). Draw both rails, and set the channel width from the range where the flag started. Now normal noise stays inside the zone, and only a decisive exit counts.
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A channel over a line, a zone over a channel
Two touches define each rail; a third touch confirms it. A single line catches only the extreme wicks, so anchor the channel to the small consolidation the pause began in. The zone then covers the real price action instead of one pixel of it.
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A retrace past half the pole kills the pattern
A healthy flag is shallow. If the pullback retraces more than about half of the pole, treat the pattern as broken and stand aside; the continuation edge is gone.
05 The flag-low sweep
Expect the flag low to be swept
Stops pool under the flag low, and price visits them before it goes
Early buyers in the flag put their stops in the same obvious place: just under the flag low. That cluster is a pool of resting orders, and price often dips through the low to fill against it right before the continuation.
Sweep and reclaim. Price pokes below the flag low, triggers the stops resting there, and then snaps back above the level. That reclaim, not the first touch of the low, is often the cleanest entry trigger.
Two entries: the break, or the sweep-and-reclaim
Break entry. Enter when price closes out of the flag channel in the trend direction. Simple and mechanical, but exposed to a false break through a single line.
Sweep-and-reclaim entry. Wait for price to sweep below the flag low and then reclaim it. You enter on the reclaim, with your stop below the sweep wick. Tighter risk, better price.
Confirm, then size. Whichever trigger you use, place the stop beyond the swept low and size the position so that stop is an amount you are willing to lose.
✓
The reclaim gives you entry and stop in one move
Mark the flag low with a horizontal line and label it stops. When price sweeps below it and reclaims it, enter on the reclaim and put the stop 1-2 ticks below the sweep wick.
06 The liquidity read
The flag maps where orders rest
Sell stops under the flag low, breakout buys along the upper rail
A flag is an area of interest, and interest means orders. The pattern tells you exactly where those orders sit: sell stops under the flag low, breakout buys along the upper rail.
Interest is liquidity. The flag low collects the stops of early longs. That pool is fuel. Larger players push price into the liquidity to fill their own size, then the trend continues on the far side of the crowd's stops.
Large players read the flag as a map of resting orders: stops below the flag low, breakout buys along the upper rail. To fill a large position without moving price against themselves, they need those orders. So price is driven into the obvious level first, the stops are taken, and only then does the continuation run. Expect the flag's edges to be tested before the move, and treat the sweep as part of the setup.
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The cleaner the flag, the more likely its edges get run
An obvious flag stacks more orders at its edges, so those edges attract price before the move. Expect the flag low to be swept, and treat the sweep as the entry signal forming, not as failure.
The whole page in six lines
A flag or pennant is a trend resting: a pole, then a tight pause, then continuation.
A flag drifts in a parallel channel; a pennant coils to an apex. Both ride a pole.
The measured move projects the pole height from the break to give you a target.
Draw the flag as a channel, then a zone anchored on the range it began in, never a single line.
If the pause retraces more than half the pole, the pattern is invalid.
The flag low is liquidity; expect it to be swept, and use the reclaim as your entry.
