Ready to learn about bull flag entry points?
The four entry points are:
- At the close or breakout above the flag
- Before the breakout
- At the pull back after a breakout
- At the break down of a bull flag
Bull flag entry points are precise entries that help traders reduce the risk of trading. The types of entries can be aggressive, moderate and or low risk. However, aggressive entry is a method not recommended in this post.
What is a bull flag?
A bull flag is a visual formation of candles in a security chart that looks like a flag with a pole. It may appear on an uptrend or a downtrend. However, it is a strong signal if traded in a security that is going up.
Otherwise, in a downtrend, it is better to watch for a sell signal.
1. At the close or breakout above the flag
In an uptrend, the aggressive entry of a bull flag can be at the breakout or close above the flag formation. Its aggressiveness requires that traders set stop loss atleast below the flag support line.
If the flag range is long, the losses may be huge, and traders are aware that they need to get out immediately from the trade when the trade is not doing well.
Some traders use 1 ATR from the breakout as a signal to close their positions.
However, aggressive entry is not usually recommended to avoid fakeouts or false breakouts.
2. Before the breakout
Before the breakout or simply anticipation is the following type of entry used to follow the price momentum. Momentum trades are a type of security trading through finding volume or liquidity.
It is often done in the banks to look for big institutions and commercial traders. However, the volume at the top of a bull flag must be high compared to the previous price candles in a stock chart.
The volume must be significant, visible or stand out from the rest for confirmation.
Also, an uptrend is a requirement for buy trades to reduce trading losses because buying in a downtrend is not a type of trade one should be doing.
3. At the pull back after a breakout
The next type of trading/buying a bull flag is the pullback type. This type is one of the most conservative entry because one has to wait a bit.
Sometimes, through waiting, a high probability trade may occur. However, some securities may not pull back, and the opportunity is already gone.
But every opportunity, such as a bull flag, is not always a high probability trade.
Thus, traders are better off selecting only the pullback entries to reduce the trading risk.
The reduction of the risk is usually the result of bringing down the number of trades.
4. At the break down of a bull flag
The fourth entry type is at the breakdown of the bull flag. Contributory to the breakdown is usually a result of the occurrence of a bull flag in a downtrend.
Because of the downward pressure, the formation of a bull flag usually fails.
The failure may show as a double top in a lower high and lower low price action.
Thus, entry is a suitable type of entry because there is liquidity at lower security prices.
The liquidity often comes from new traders trying to buy at the bullish flag formation. Their entries are usually at the breakout, as described in entry number one above.