Using the Bear Flag Pattern in Forex Trading
If you are new to Forex trading and have not yet tried out any bear flag patterns, you should do so today. Just like any other chart patterns, this pattern has its own pros and cons. But more importantly, it is an excellent indicator that can be used for predicting the movement of the market. Bear flags have their own unique characteristics that help traders in making intelligent trading decisions.
The bear flag is basically a continuation pattern that signals that the uptrend is about to resume after the short break. In fact, the bear flag is actually a bullish candlestick pattern that also indicates that the uptrend is about to resume. The bull flag pattern, once again, helps sellers in pushing up the market price to break through the lower two trend lines on the upper side of the forex chart. This gives them ample time to accumulate before the next big buyers join the price action.
There are a number of bear flag patterns that one could try out. One of these is the symmetrical triangle pattern. The symmetrical triangle pattern is characterized by a symmetrical formation of the three points of the pattern on the same horizontal axis. Usually the middle point forms a triangle with the points pointing upwards or downwards.
Traders can use the symmetrical triangle pattern to identify support and resistance levels. These support and resistance levels act as resistance levels in the symmetrical pattern. As the pattern becomes clearer, traders can work out the parallel trend lines and connect these parallel trend lines to the current uptrend line. The central point is often called the support level and the area between the middle point and the previous resistance level is called the resistance level.
There are other bear flag patterns that traders should watch out for. These patterns have the similar characteristic of the symmetrical triangle but they also look like the previous consolidation patterns. In consolidation patterns, sellers usually try to push the prices higher so that they can regain control of the trading momentum. Traders could take advantage of the sideways movement of the prices and use it as a platform to place their stop losses.
A bear flag pattern could turn into a reversal pattern if sellers are unable to maintain the pressure. In this situation, sellers would counter attack and attempt to take back control of the market before it reverses and retraces. Traders would have to be very precise as to where exactly the flag pole will hit the support level. They must be prepared to suffer huge losses if they happen to place their stop loss below the low of the said resistance level. On the other hand, a successful reversal could result in a smaller profit because the market has already been pushed down to lower levels.
The bear flag pattern has been used in forex trading for more than a decade now. It is one of the oldest patterns that many traders use in order to determine the direction of the market. One good thing about using this bear flag pattern in forex trading is that it is easy to identify. You only need to observe the movement of the flags in relation to each other and the overall trend of the market. This will help you determine whether the market is on the upswing or downtrend.
Most traders who have been using this bear flag pattern in forex trading since the 90s have been able to gain significant profits. However, this strategy requires patience, determination, discipline, and a strong eye towards the markets. Bear flag strategies will never work all the time. They depend on timing and on how well you can identify the right times to trade.