Spotting a Bull Flag Pattern
This blog post will cover:
- Defining a bull flag
- Duration of a bull chart
- Spotting a bull flag pattern
- Making bull pattern trades
- Variance from bull to bear charts
A bull flag chart pattern is an analytical method believed to indicate the value of a certain asset, digital or otherwise, will rise in the near future.
We wrote this piece to explain the information delivered by this pattern, how to identify and analyze it, and the ways in which it differs from a bear pattern. Finally, we look at the multiple advantages of the pattern, as well as some slight disadvantages to traders and investors.
As the name suggests, a bull flag chart pattern indicates the consolidation of a bullish trend. When we speak of a bullish trend, we mean the price of an asset is increasing. The opposite would be a bearish trend. Check out our previous article to discover the detailed information about 2 market types.
On each side of the flag, you will see a pole. You can observe this in the event of a slight price fluctuation preceding or succeeding a great rise or drop.
Defining a bull flag
The pattern features a consolidating flag that is horizontal or vertical. A significant increase comes after the pattern. This is also known as a breakout. In the area of cryptocurrency, this term denotes a major shift when the value of a given asset breaks through an important degree of resistance or support.
Resistance is a price level where an asset historically has struggled to pass, while support is a level, below which the asset has rarely fallen.
In the event of a breakout, we observe a change in supply and demand. If the crypto passes the resistance level, it often means its value is going to keep increasing. If the breakout is below a support level, it will probably undergo further decline.
Breakout patterns frequently give insight into possible tendencies and opportunities. In the context of market volatility, participants avail themselves of the bull chart. They also take trades that go on for several days up to a few months so they can profit from an upcoming price shift.
This also happens if a pronounced and sustained tendency is observed.
The primary purpose of the bull pattern is to make it easier for people to make money from a given tendency. Savvy investors can take advantage of this data to spot opportunities and turn a profit.
Duration of a bull chart
A bull chart will not be observed for long. The tendency can take place for up to a month and a half. After spotting it, the price of the respective asset will keep increasing. When the chart disappears, the value of the asset is going to rise.
Spotting a bull flag pattern
The bull flag has three primary characteristics where any type of trading is concerned. With growth of the relative trading volume, the crypto builds the mast. When it drops, the crypto generates the pattern by coming together near the top of the mast.
With stabilization, the asset leaves the pattern to sustain the tendency. The final stage is at this point.
This type of bullish pattern assists in finding the areas that must be corrected until the past trend comes back. The prior shifts need to be present for the bull flag to form.
When trading cryptocurrency, one would be wise to apply alliance later as a remedial measure. Lateral movements, vertical trends, and banners frequently frame value changes. The triangular banners represent tendency lines coming together. This is the case in the event of a series of increases and decreases, which builds the intervals.
Breakout occurs in the final phase, and it indicates the best entry position. The peak attained earlier is the first goal for the chart.
Now, let’s explain how to take advantage of this chart.
- Spot ascending motion, a tendency that you can recognize beneath a set of bars moving up.
- Wait for corrective movement in a descending direction, revealing a lower level or similar form.
- Place your order at the corresponding “breakout” point.
Making bull pattern trades
Crypto market players make an entrance at the level where the shape framing the descending channel loses its downtrend after one has recognized the respective pattern. They use a volume gauge to establish the corresponding sign after the price of the crypto they want to trade. The process ends when the price surpasses the resistance.
By means of the gauge on the value chart, market participants can prognose that trades will drop as the price is corrected. The tendency will likely remain stable if they become more active after the pullback.
The stop-loss must not be below the pattern’s support. The stage to close the trade is spotted after you consider the risk.
The many elements that come into play have led some market participants to wonder whether the bull chart has any reliability at all. Is it viable to build an investment approach based on it? The result of applying any approach is contingent upon the investor’s appetite for risk. The outcome depends on the extent of their understanding of the signs a bull chart is about to form. These include increasing crypto prices or pullback as the value levels off around a certain peak.
Variance from bull to bear charts
Bear charts are similar to bull charts, with the exception that they move differently. The tendency is downwards for a bear chart. Traders can spot a bull flag if there is an accelerated rise prior to formation of the chart. A descending tendency builds the bear chart. Traders refer to this as the mast of the flag. It precedes the flag, or a stillness in the merging area.
The individual’s risk tolerance determines their next move. Possibilities include placing long or short orders when a distinct tendency is spotted.
When a bull chart builds, you can make a long order at the clear value level. You can also potentially recognize the proper time to place the stop-loss.
Despite the pluses, trading according to these signs brings certain risk. If the conjuncture suddenly changes or the value of the asset becomes unstable, you can lose a significant amount of money. So please, be aware of all the risks that you might face when trading cryptocurrency.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.