Unit 2 · Level 3 · Chart Patterns
Continuation: flags & triangles
After a sharp move (the 'pole'), price often drifts sideways or slightly against the trend in a tight channel. That's the FLAG. Early winners take profit, fresh buyers absorb it, then the trend resumes. Triangles are cousins: the range compresses into a point until one side gives.
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What you get asked
What makes a bull flag 'bullish' rather than just a dip?
Sellers lack conviction. The tell is the QUALITY of the pause: tight, calm, volume drying up. Panic-shaped pullbacks on heavy volume are not flags. They're warnings.
Match the continuation pattern to its shape
An ascending triangle is crowd psychology in miniature: sellers hold a line while buyers raise their bids relentlessly. Something has to give, usually the ceiling.
Volume during a healthy flag typically ___, then expands on the breakout.
Quiet pause, loud resumption. A 'breakout' on silent volume from a noisy flag is the fakeout profile you already know.
Order the flag trade, League-2-style
The pole-projection target is the classic 'measured move'. Not physics, just a sane, testable convention for R:R math.
A flag breaks out, you enter… and it collapses back inside. Your stop hits for -1R. The trained interpretation?
Plan intact. Even A-setups fail ~half the time; expectancy carries you, not certainty. And failed patterns often ARE the trade... next lessons. 🐜
The rest of this unit
Flags, triangles, double tops, traps: crowd psychology drawn on a chart.