Story by: Karlina Armady
Published: July 25, 2018
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Karlina is a Senior Trading Advisor who has more than 5 years experience in financial trading. She also manage the famous CAT certification program Institute as school principal. She is here to inspire you with great stories and motivations.
Traders can learn a variety of trading patterns using technical analysis. One of the most useful patterns in a market experiencing a trend is the flag pattern. This time, I will share how to see and identify a transaction by utilizing a flag pattern that can identify a downtrend.
There was one CAT Program trader, Bambang Irianto, who was very fond of this trading pattern. According to him, this pattern is one that could bring him profits, can bring his family to Umrah and buy a house in the Bogor area. A piece of the story above can hopefully give you motivation that there are actually lots of trading techniques with various patterns that you can master and make you rich. In this article, I will share with you specifically the bearish flag.
The following is how to apply the bearish flag pattern with 3 easy steps:
Firstly, look for a Flag that will be marked as the beginning of the trend decline, whether it falls sharply or slowly.
Secondly, you must have a tolerance limit when the flag is specified. This will be a period of consolidation in the price decline. During this period, prices may turn up slowly. In this situation, the trader is advised to wait until the price breaks the position lower than the previous trend.
Lastly, after a lower descend in the price, that's where you can find the last component needed in trading with this bearish flag pattern. The advantage of this trading is obtained from a reversal after the price has reached the lowest trend. The price level should be determined in advance by measuring the distance pips since the decline. Then, the value is reduced by the predicted resistance line. For more details, you can see the picture below:
The picture above is of a bearish flag pattern on the EURJPY daily chart. From the formed flagpole, traders can see the correlation between June 21 at the level of 101.61 and July 24 at the level of 94.10. From the series of points formed, there appears to be a difference of 751 pips since the decline.
From the figure, it shows that prices are in a phase of consolidation. After the price starts to rise gradually, you can see the formation of a bearish flag pattern. By utilizing this pattern, you can generate a profit of 751 pips when the falling price reaches a potential target which is near the level of 91.00.