Trading term

What is Flag?

A flag is a short-term continuation pattern: a sharp, near-vertical price move (the 'pole') followed by a small, tidy consolidation that drifts against the trend in a narrow parallel channel (the 'flag'). It usually breaks out in the pole's direction, resuming the move.

A flag has two parts. First the pole: a steep, powerful move that covers a lot of ground quickly. Then the flag itself: a brief pause where price consolidates in a tight, parallel-sided channel that slopes gently against the pole — a bull flag drifts slightly down, a bear flag slightly up. It looks like a flag on a flagpole. The consolidation is orderly and shallow — profit-taking, not a reversal.

Flags are among the most reliable continuation patterns because the logic is clean: a strong move pauses to catch its breath, then continues. The breakout — a close out of the flag in the pole's direction — is the trigger, and the classic target projects the pole's height from the breakout point (a 'measured move'). Flags are short-lived; one that drags on too long or retraces too deeply is suspect and may be a reversal instead.

A bull flag
PoleFlagBreakout ↑

A steep pole, then a small parallel channel drifting gently against the move (the flag), then a breakout that resumes the trend. The target projects the pole's height.

For example

A stock rockets from $40 to $50 (the pole), then drifts down to $47 in a tight channel over a few days (the flag). It breaks out above the flag, projecting a measured move of about $10 more — toward $57.

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Why it matters to you

A flag is a trader's favourite because it offers a high-probability continuation with a clean, measurable target — the pole's height. Spotting the pause after a strong move lets you join a powerful trend at a controlled entry, rather than chasing the initial spike.

⚠ A deep or long flag is suspect

A real flag is shallow and brief — a quick breather. The mistake is treating any post-move pullback as a flag. If the consolidation retraces most of the pole or drags on for a long time, the momentum is gone and it's more likely a reversal than a flag. Shallow and short is the tell.

Frequently asked questions

What's the difference between a flag and a pennant?

Both are short continuation patterns after a sharp 'pole' move. A flag consolidates in a small parallel-sided channel that slopes against the trend; a pennant consolidates in a small converging triangle. They behave the same way — a brief pause before the trend resumes.

Is a flag a bullish or bearish pattern?

Either — it continues the trend of its pole. A bull flag follows a sharp move up and breaks out upward; a bear flag follows a sharp move down and breaks out downward. The flag itself drifts gently against the pole before the breakout resumes the original direction.

How do you set a target for a flag?

The classic 'measured move' projects the height of the pole from the breakout point. So if the pole rose $10 and price breaks out of the flag at $48, the target is roughly $58. It's an estimate, best combined with other resistance or support levels.

How long should a flag last?

Flags are short-term by nature — a brief consolidation, not a drawn-out base. A flag that lasts too long or retraces deep into the pole loses its edge, because the strong momentum that made it a continuation pattern has faded. Shallow and brief is healthiest.

Related terms

Ascending triangleAn ascending triangle is a bullish continuation pattern: a flat horizontal resistance line on top, with a rising trendline of higher lows beneath it. As the higher lows squeeze price against the ceiling, pressure builds — and it usually resolves with a breakout up through the resistance.ATR (Average True Range)ATR (Average True Range) measures how much a security typically moves in a period — its volatility — as an average of recent trading ranges. It doesn't say which direction price is heading, only how far it tends to travel, which makes it a core tool for stop-losses and position size.Bollinger BandsBollinger Bands wrap a price chart in three lines: a middle moving average with an upper and lower band set two standard deviations away. The bands widen when volatility rises and squeeze together when it falls, framing whether price is relatively high or low.BreakdownA breakdown is when price falls decisively through a support level it had been holding above — the bearish mirror of a breakout. It signals sellers have overwhelmed the buyers defending support, and often triggers a fast move lower as stops and new sellers pile in.
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