How to earn from flags: a practical guide to bearish and bullish patterns

Every day, millions of traders analyze charts in search of profits. Among the numerous technical analysis tools, one pattern consistently ranks high in popularity — the flag and its variations. If you learn to recognize bullish and bearish flags, your ability to catch trends will significantly improve.

The main advantage of these chart formations is that they identify entry points with controlled risk. Instead of blindly wandering the market, you will receive signals with high accuracy. Let’s understand how flags work and how to profit from them.

What does a flag really mean on a chart

On a chart, the price often moves not just up or down — it pauses, forming parallel lines. These trend lines, which remain nearly parallel, create the same flag pattern.

The essence is simple: a flag is a short consolidation during a trend, which precedes its continuation.

It forms as follows: initially, the price makes a decisive movement (pole), then moves sideways for a while, creating a small channel. This channel resembles a parallelogram — that is the “flag.” When the price breaks out of this channel, it usually continues moving in the original direction.

Traders react instantly to the breakout — some take long positions, some enter, some close their trades. And this moment is the most profitable.

There are two main types:

• Bullish flag — forms during an uptrend
• Bearish flag — appears during a downtrend

When the price breaks the bullish flag: how to profit from it

Imagine: the cryptocurrency price is rising, then it “breathes” — moves sideways, forming the same channel. The graphic pattern of a bullish flag is a signal that the larger trend is still alive and preparing to continue upward.

How to trade:

Place a buy-stop order above the upper boundary of the flag. If the price breaks upward, the order triggers. Simultaneously, set a stop-loss below the pattern’s minimum — this is your safety cushion in case of a reversal.

It’s advisable to wait for confirmation — when two candles close outside the formation. This increases the reliability of the signal.

Practical example with real numbers

On the daily timeframe, a bullish flag formed near the level of $37,788. A buy order was placed here. The stop-loss is set at $26,740 — protecting your portfolio from sudden drops due to news or macroeconomic factors.

This approach allows trading with a specific target and risk, rather than guessing on every tick of the chart.

Want confidence? Add technical indicators: moving average will show if the trend is truly strong, RSI and MACD will clarify the entry point.

Bearish flag: when the market is preparing to fall

Unlike the previous one, the bearish flag pattern appears after an upward move, when the bears start to take over and the momentum slows down. This doesn’t mean the market will fall tomorrow, but the chances of a slowdown or reversal increase significantly.

A bearish flag forms when the price makes parallel lines during a decline. This pattern often appears on all timeframes — from minutes to monthly charts.

How to trade:

Place a sell-stop order below the lower boundary of the flag. If the price drops through this level, the order triggers a sell. Set a stop-loss above the upper boundary of the formation.

The principle is the same: you enter with controlled risk and a clear exit target.

Why this pattern works constantly

Flags are psychological formations. Large players try to convince the market that the trend has ended, but bigger players know it’s just a pause. When the controlling positions break out, the price follows them.

The key is to catch the entry point and set the correct stop-loss. Without this, even the best pattern does not guarantee profit.

Whether you’re a beginner in crypto trading or an experienced analyst, bullish and bearish flags remain some of the most reliable tools in your arsenal. The main thing is to practice, stay disciplined, and never forget about risk management.