Before we talk about bull flag trading, do you know the basics? Well, if no – Then just finish all these videos from Tradimo.

Now let’s keep it simple and I will tell you one golden strategy which you can follow tomorrow and prove me wrong making loss.

It’s called Bull Flag Breakout Strategy! It falls under Momentum Trading and one of the rare non-mean reversion strategies.

Flags and pennants (Indians call it Slant Flag) are foundation chart patterns of technical analysis. Let’s skip the technical terms like Bull Flags, Bear Flags, Flat Tops, Flat Bottoms, and Ascending and Descending Wedges.

What is a flag?

The Indian Flag

Yes, that pretty much comes upon Google Search. Now here is a snap of HDFC Bank at 17th February –

HDFC Bank Intraday Strategy

Actually, we were discussing this live in our investor channel. Feel free to join if you want –

Bull Flag Trading

So what is a definition of a flag in bull flag trading?

First, it’s a bull flag. Bull flags have a green pole. Bear flags’ pole is red.

If you are not familiar with Fibonacci, 23.6% is part of the Fibonacci series and is in the default series for most trading platforms. The point of looking for patterns with less than 23.6% retracements is a good way to only identify the flags.

As you can see after the huge green pole, it made a 23.6% already. More than that generally signifies a bearish breakout for a bull flag.

Bull Flag Trading Opportunity:

  1. Bet on one setup. I bet on a bearish breakout as the retracement is more than 23.6%.
  2. I put a sell limit order on the lower point of the flag spread which was 1400 as you can see from the chat. So it will trigger a sell if it crosses down 1400.
  3. We must put a stop loss as these are all matter of probability. The stop-loss is at the top of the poll. As this strategy has a high probability of profit our risk is more than reward.
  4. Optimize the Stoploss to make more profits. Here is one idea. If retracement is more than 23.6% then put the stop loss at 10% down from the flag pole’s top which is generally the close of the first bear candle.
  5. Optimize the entry to make more profits. All flags make a cone like a slant flag as shown below. I entered at 1410 based on my strategy.

Pennant flag

This is slant flag or Pennant flag.

Exit Strategy:

In Bull Flag trading, Exit Strategy is more important than entry strategy. Most flags end up with multiple steps. In this case –

Bull Flag Strategy

Here is a note for Pro Traders – To save margin place the orders when the bollingers spread starts to decrease significantly.

Flag Breakouts

Also Probability of Profit (POP) of “Sell 1410 Buy 1400 SL 1415” is more than “Sell 1400 Buy 1390 SL 1405”.

So use weights to maximize more profits in bull flag trading. If you have sold 5 lots at ‘Sell 1410 Buy 1400 SL 1415’ then sell 4 lots at ‘Sell 1400 Buy 1390 SL 1405’, 3 lots at ‘Sell 1390 Buy 1380 SL 1395’ and so on.

By lot I mean your quantum. I allocate 50K in lot in equities as a lot mostly. It means for 1 lot HDFC I would buy/sell shares worth of 50K ~ 50K/share price.

That’s all you need to know. Period.

Bull Flag Trading Example #1 –

Justdial Flag at the same day:

Justdial Flag Strategy

Less than 23.6% retracement makes a strong chance of a bull breakout.

Just going off-topic with Bollinger’s’ strategy.

People ask me why I always close Bollinger’s on price action. If you haven’t sold that based on price action; this would’ve happened with you too –

Flag Strategy

Bull Flag Trading Example #2 –

Cadilla Flag at the same day:

Cadilla Share Price

Less than 23.6% retracement makes a strong chance of a bull breakout.

Bull Flag Trading Example #3 –

Axis Bank today:

Axis Bank Share Price

This is an important one as it shows importance of stop loss and confirms that fact that you must not go egoistic after few trades.

There will be one trade that will make you tank! Here –

  • Less than 23.6% retracement makes a strong chance of a bull breakout.
  • But it made a bear breakout.
  • You can’t capture it unless you had put limits on both spreads i.e. buy order at upper flag spread and sell order at lower flag spread.
  • But with proper entry and exit, it was a nice profit.

Wait, But you can use proper time frames to perfect it. I choose timeframes based on the beta. It’s my own theory for live market data. Actually, the perfect timeframe was 30 mins.

Axis Bank Bull Flag

  • Less than 23.6% retracement makes a strong chance of a bull breakout.
  • It was a bull breakout.
  • Anyways it is profit in any cases if you use proper entry and exit strategies

Bull Flag Trading Example #4 –

Reliance today:

Reliance Share Price

Here is a note for Pro Traders – You can use Bollinger Strategy or other mean reversion strategy at the flag end to maximize more.

You can see a perfect application of flag and Bollinger!

Conclusion

People become ultra-complicated sage after learning tons of strategies. If you want to become one, you can land here to Learn more strategies.

  • But I beg you to stick with this bull flag trading setup and test live.
  • Let’s keep the slant flag story to another day 🙂
  • All charts are from my live trades which I had shared in our slack channel.