What Is Flag Pattern?
A flag pattern is a short-term continuation pattern that forms after a strong directional move (the "flagpole"). The flag itself is a small consolidation that slopes against the prior trend — after a sharp rally, price drifts downward in a tight channel (bull flag); after a sharp decline, price drifts upward (bear flag).
How Flag Pattern Works
Flags are "breather" patterns — the market pauses to consolidate gains (or losses) before continuing in the original direction. The consolidation typically lasts 1-3 weeks and retraces 30-50% of the flagpole move. Volume decreases during the flag and increases on the breakout. The target is the length of the flagpole projected from the breakout point.
Why It Matters for Traders
Bull flags are among the most reliable continuation patterns in crypto, especially during strong uptrends. A bull flag on Bitcoin's daily chart after a 15%+ impulse move, with decreasing volume during the consolidation, has historically produced some of the best risk-reward entries. The tight stop (below the flag) and long target (flagpole projection) create outstanding R-multiples.
