Trading Forex Flag Pattern

Flag pattern is on of the most common patterns on Forex charts.
It appears after big moves such as rallies and sell offs.

How to spot it visually?
It looks next way:



How to find it using theory?
Let's take uptrend: after a big rally the market starts to lose its momentum temporarily allowing sellers to press the price down. Here the market is starting to make lower lows and lower highs , but the overall progress is quite insignificant.
After two lower highs traders may draw a trendline above those highs and draw additional parallel to it trendline below the price action. Two trendlines will form a channel. Visually it will look like a flag on a flagpole.

The theory suggests that the market that was trading up and formed a flag pattern will break out of that pattern in direction of a previous trend, which means upwards.
So traders can place buy orders above the flag pattern.

The profit target is calculated based on the length of the flagpole, which is projected from the break out point. Stop loss is placed below the lower trend line.

That's it. Very effective and easy to trade Flag pattern in Forex.

Is it a TREND or a TRADING RANGE?

Can you tell a trend from a trading range?

Trading ranges don't have a neat picture of higher highs and higher lows, or lower highs and lower lows. They are rather a price tops/bottoms randomness, where it is very difficult to focus and choose a market direction, not to mention make any trading decision.

That's how a trading range looks like:

So, what do you think? What's easier: trading with a TREND or trading in a TRADING RANGE? I bet you know the right answer. And if so, you should be clear out of trade when you spot a "mess" on the chart. Remember that when you not trade you are actually also making a decision and it is to preserve your capital and not take a risk.

Are you trading with a TREND?

To make stable profits trading Forex, you need to know market trends.

Why traders want to know trends in Forex? Because when they know what is the current trend (up or down) now, they can open a trade in the direction of this trend. Going against the trend is not wise as well as can be costly.

How to identify a trend in Forex? Good question. Look at charts and you will see waves. the price goes up and down making Tops and Bottoms.



when you have higher tops and higher bottoms - you've got an uptrend. When you see lower tops and lower bottoms - that's a downtrend.
I know you will now say "that's easy!". Awesome! We've covered the most important topic about Forex trading: "Trend is your friend, trade with it".