Pennants and flags on Forex.

The use of graphical analysis often causes controversy among traders, but the majority is still inclined to believe that there are figures in it that predict trend behavior with relatively high accuracy.

The category of such figures includes a pennant and a flag; the appearance of such figures on the chart of a currency pair allows you to prepare for opening a successful transaction and take measures to insure an existing position.

Pennants and flags are narrow phases of consolidation that are within a trend for a very short time. If the figure is outlined by parallel lines, then it is called a flag, but if these lines converge, then it is a pennant. Novice traders often confuse a pennant with a triangle, but there are differences between them. The formation of pennants occurs much faster.

If you saw one of these figures, then this indicates that the strong trend took a short pause. A breakdown of the boundaries of one of these figures can indicate two things: either the trend will continue to move, or it is a signal to start trading in the trend direction.

Due to the fact that breakouts, as a rule, go along with the trend, many experts advise starting trading before the Forex breakout .

This gives traders the opportunity to work on more favorable terms. If you see that the flag or pennant has been broken at the bottom point of the pattern, then this point should be designated as a protective stop. A significant breakdown of the boundaries of the figures in question from unexpected sides indicates the presence of a strong signal for a trend reversal.

From trading practice it is clear that in most cases these figures are directed against the main trend.

However, the same practice says that the direction of the flag (pennant) is not particularly important. If one of these patterns is near the top line of the trading range, then this may indicate the presence of important bullish sentiment.

If flags (pennants) appear directly below the border of this range, then this indicates that the market has reached its top, but is still not retreating. In this case, they say that the market is preparing for an upward surge. If the figures in question are formed above the range line, this indicates an increased probability of a possible breakdown.