Crypto Trading 101: Bull and Bear Flags

A trader can spot trend extensions with the help of bullish or bearish continuation patterns, which occur in a variety of easily identifiable shapes, some of the most popular of which are known as bull and bear flags.

A bull flag is appropriately spotted in an uptrend when the price is likely to continue upward, while the bear flag is conversely spotted in a downtrend when the price is likely to sink further.

The "Pole" represents a strong impulsive move and is backed by a surge in trading volume and the subsequent pause or consolidation the "Flag," which looks like a falling or rising channel.

If resistance breaks in a bull flag, the trader can be confident price will continue upwards roughly the length of the pole.

If support of the bull flag is breached, the trader knows the pattern is invalid and continuation is unlikely.

An asset usually mimics the pole after a bull flag breakout or bear flag breakdown.

Bull flag breakout >> Pole height added to breakout price.

Bear flag breakdown >> Pole height subtracted from breakout price.

Bull flags and bear flags can be a trader's friend in strongly trending markets, but they do not always perform as advertised.

As a trader, you would want to avoid betting or punting on an asset price if the bull flag breakout of bear flag breakout is not backed by strong volumes.