What do Flags and Pennants Formations look like?
What’s the main difference between Flags and Pennants? A Flag consists of 2 parallel trendlines (support and resistance) that slope against the previous trend. The Pennant consists of two converging trendlines that begins wide and converges and is a very short term Symmetrical Triangle. How to trade these patterns? Always trade Flag and Pennants in the direction of the previous (main)trend: (1) If the previous trend was up, wait for a break out to the upside and go long when the currency pair rises above the upper resistance trendline. Place your stop a few pips below the lower support trendline. (2) If the previous trend was down, wait for a break out to the downside and go short when the currency pair falls below the lower support trendline. Place your stop a few pips above the upper resistance trendline.