Flag Pennant

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July 4th, 2010 admin Leave a comment Go to comments

Flag Pennant

Forex Trading Market - Talk About Flags And Filtering Entries

In forex markets, there is a situation when the traders often witness the price fall rapidly, then consolidate, and then continue its fall. In between these two falls is a period of rest, also known as consolidation.

A currency pair consolidates its gains or losses before moving on. A rest period indicating that the exchange rate will continue to move in its previous direction is referred to as the continuation pattern.

The Flags

Natalia Osorio Editor of the "Best Forex Trading" website -- http://www.BestForexTradingUsa.com -- pointed out;

"…Flags, as well as pennants, are short-term continuation patters. After the formation of the flags, the exchange rate has the tendency to resume its movements in the same direction as it was preceding the consolidation. Flags are usually found on intraday and short-term charts. In the case of the flags, the preliminary move is a sharp, sudden directional thrust. Even if the move is an advance or decline, it does not matter. What matters is the velocity of the move. The sharp burst generates a long candle or even a series of long candles on a short-term chart; this is also known as the flagpole…"

Flag formations are also in continuation patterns, which mean that the most likely decision of the consolidation will be a breakout in the similar direction as the flagpole. Generally, flags contain two parallel lines sloping away from the direction of the flagpole.

The Filtering Entries

There are impatient traders who opt to enter when the price clears the upper line of the flag, instead of waiting for the price to reach the right entry point. This is absolutely a mistake.

"…Normally, if the exchange rate escapes from the formation of the flag but fails to clear the top of the flagpole, there is no reason to assume that the trade should be triumphant. However, by waiting for the exchange rate to clear the top of the pattern by an amount equal to 10 percent of the flag, traders can filter out a poorer entry that would have been disastrous…" N. Osorio added.

Further Information About The Best Forex Trading Softwares And Resources By Visiting; http://www.BestForexTradingUsa.com

About the Author

Natalia Osorio runs her corporate website at http://www.OpsRegs.com where you can see all her articles and press releases.