Hey everyone! Sean Here, order your trading in today. I Want to go over the flag pattern with you and go over some tips on how to trade it. So what is a flag pattern? Well it's a trend continuation chart pattern where a stock makes a strong move up or down creating what looks like a flagpole and then goes through a period of tight consolidation which will create this flag shape before continuing on its previous move. Some core flag pattern characteristics that you want to see is a strong up or down drive on high relative volume and preferably we want to see this with the Muse catalyst.

You also want to see tight consolidation pattern on lighter volume with a defined support or resistance. Trendline: When it breaks out of the flag, you want to see volume pick up as buyers pile back in and take it higher. This will confirm the breakout and increase the likelihood of the trade working out. So let's look at a couple examples.

This first one we have is on the I BB this was back in September This is a pretty good break out here. A nice flag pattern. You see we have this strong drive up high relative volume and then we had this consolidation period. This is a pretty long consolidation period I mean this was over a few weeks time.

but what I really liked about it was how many times I tested this descending trendline. You know the more times it tests it the more I like it for a breakout which you can see. happened here finally after it tapped into the 20 ma a couple times we had the volume come in on the breakout and then you know we got a nice 5 / 5 point move on it. So this is a good this is a good setup.

We have another one here on our Why A.m. This is like a picture-perfect flag so we had really strong move up on high volume, high relative volume and a nice tight consolidation range here with a defined descending resistance line. So when you're watching this you want to wait till it gets above this trendline which it did here and this just took off. You mean you see a huge volume spike and what you can do when you're trading these flight patterns is you know you look to get in when it breaks the pattern and then you want to use the low of the consolidation range as your stop which would have been down here and then I like to add to my position once it breaks over the highs from the initial drive.

so as a crosser here added to your position and then you start taking profits according to your risk reward ratio. Another look here is this is a GE bear flag. So what's really nice about the flag pattern is it can be used both in a long trade or a short trade. This is a bear flag we had GE I believe had some news on it and we had You know this really good move down on high relative volume and then we had a tight consolidation period here where we had a support trendline that it tested a few times before braking here.

So what you could have done was take that trade on the breakout with your stop above the highs up here on the consolidation range and then added up when it broke through lows and then start to cover as it push in your favor. This is real clean set up I believe Mike took this in the room. Actually this is a great great trade here. So some tips for trading the flag pattern: You want to look to enter the trade when the stock breaks out on volume, not before.

You also want to use the low of the consolidation range for your stock and then you want to look to add to your position as it pushes through highs from the initial drive. Profit target should be at least two to one of your risk reward ratio, but it's also a good idea at least some of the trade on in case the stock makes a really strong run up with this momentum flag pattern. It's very likely that you could also see a three to four to five to one risk reward ratio on this trade, so it's always a good idea to leave a little bit on the table. So that's the flag pattern and some tips on how you can trade it If you have any questions, let us know in the comments below.

All right, have a good one guys. Oh hey I didn't see you there while I was just working on the dream board for my next home run trade. Hopefully it comes soon. Until then, make sure you subscribe to get email alerts anytime! I Go live or upload new videos.

Until then. Happy surfing!.