Flags signal the continuation of the previous trend in Forex. Unlike trend reversal patterns they consist of short consolidation periods. They look like a flag. They consist of a steep upward or downward trend (flagpole) and a brief consolidation period which tends to be sloped in the opposite direction of the trend or it is simply flat. Consolidation is bordered by support and resistance lines which are parallel or mildly converging to each other. These lines give the flag. When price breaks out of consolidation price target is the length of the flagpole measured from the point of breakout. The higher the time period of flag formation the more valid the signal. Beware of false breakouts from the flag.

Watch the videos below to visualize the use of flags in your Forex analysis

This entry was posted on Wednesday, March 14th, 2007 at 8:28 am and is filed under Forex Trendline Analysis. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.