A Flag Chart Pattern is a popular continuation pattern in forex trading that signals a brief consolidation before the previous trend resumes. It resembles a flag on a pole, where the "pole" represents a sharp price movement (up or down), and the "flag" is a small, rectangular consolidation phase.

There are two types of flag patterns:

Bullish Flag – Forms after a strong upward move (pole), followed by a slight downward or sideways correction (flag). Traders anticipate an upward breakout, continuing the uptrend.

Bearish Flag – Occurs after a steep decline (pole), followed by a minor upward or sideways correction (flag). A breakdown below the flag suggests a continuation of the downtrend.

Flags are characterised by parallel trendlines or a slight channel against the prior trend. Volume typically declines during the flag formation and surges on the breakout. Traders often enter positions when the price breaks out of the flag, targeting a move equal to the pole's length.

This pattern is reliable because it reflects a pause in market momentum before trend continuation, making it useful for short to medium-term trading strategies. Proper risk management, such as placing stop-loss orders beyond the flag, is essential.