Descending flag: how to profit from this pattern

Everyone has seen how the price of a cryptocurrency skyrockets, then suddenly drops for a few days, and then shoots up again? This isn’t a coincidence. It’s a pattern traders call a descending flag, and it’s predictable.

Why it works

After a strong price surge, there’s often a brief “pause”—a period when the price trades in a narrow range. It looks like a consolidation moving downward. On the chart, it resembles a flag on a pole: the pole is the sharp rise, the flag is the sideways, downward movement.

The key point: this is a bullish pattern. Most traders misinterpret it, thinking the rally is over. In reality, it’s just a regrouping before another surge.

How to recognize it

1. Strong upward trend — the initial surge upward
2. Consolidation period — the price bounces up and down, but within a narrow channel
3. Two parallel lines — the upper and lower bounds of this channel form the flag shape, sloping downward
4. Breakout — when the consolidation ends, the price moves upward again

How to trade it

The trader’s dilemma is simple: sell during the flag’s drop (miss the rally) or hold on (risk losses if the pattern breaks).

The right answer: use a stop-loss (a point where you exit if the prediction doesn’t work out). That’s risk management.

Don’t rely on a single pattern. Combine it with other technical indicators to increase your chances of success.

Pros and cons

✅ Pros: clear entry/exit points, gives an edge in a bullish trend

❌ Cons: sometimes gives false signals, volatility can break the pattern

The main thing: patterns are not a guarantee, but a probability. Use them as a tool, not as a holy grail.