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.