I'm currently working through Guy Cohen's new Flag-Trader product in order to produce the final review.
In the meantime, you can find the work in progress being listed by disk content in the 'What You Get..' pages in the right hand column.
Currently there is information on the Flag-Trader Introduction and chart patterns. More to come in the near future.
Watch this space.
Bear Flag Chart Pattern
The bear flag pattern is the opposite to the bull flag in that the configuration is the same but it is found in a downward trending stock. With the bear flag the shape of the flag and flagpole is inverted as though upside down.
The bear flag is a continuation chart pattern in which the price slightly retraces the preceding decline in the downward trend.
The sell point is when price breaches either the lower trend line of the flag area for an aggressive trade or the lowest price reached in the flag area for a more conservative approach, ideally with increasing volume indicating that the market sentiment is to continue downwards.
For a true flag the pattern has highs and lows which can be connected by small parallel trend lines
Bull Flag pattern
The bull flag pattern is found within an uptrend in a stock. Flags are named after the resemblance of the chart pattern to a flag flying from a flagpole.
A bull flag occurs in a rising market within an upward trend and is the flag that most accurately reflects the description. The flag is characterised by a series of lower highs and lows that do no break out above the first high at the flagpole. A true flag should retrace slightly against the trend.
The bull flag is a continuation pattern and only slightly retraces the price advance that preceded it.
The flag establishes a number of possible buy points depending on how aggressive the trader wishes to be. These may be when the price breaks above the upper trend line of the flag or when the price breaks above the highest high of the flag pattern.
The bull flag should be read in conjunction with the volume. The best flags are clearly visible with strong upward price thrusts with good volume to form the flagpole followed by the retracement with a slight downward movement with volume decreasing indicating a lack of conviction by the market the the price is going in the right direction. It should be possible to draw parallel trend lines on the top and bottom limits of the flag pattern giving the appearance of the flag.
As we are about to delve into flag patterns and flag trading I thought it would be useful to go back to basics and dig up the consensus opinion of what a chart pattern is. The following definition of chart patterns comes from Wikipedia.
A chart pattern is a pattern that is formed within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period of time. Chart patterns are used as either reversal or continuation signals.
Some people claim that by recognizing chart patterns they are able to predict future stock prices and profit by this prediction; other people respond by quoting "past performance is no guarantee of future results" and argue that chart patterns are merely illusions created by people's subconscious. Certain theories of economics hold that if there were a way to predict future stock prices and profit by it then when enough people used these techniques they would become ineffective and cease to be profitable. On the other hand, if you can predict what other people will predict the market to do then that would be valuable information.
As you can see there are some very differing views. It seems to me that many trading methods are successful, especially for those who focus on a particular method and manage to establish the exact environment in which a particular price movement takes place. After all, it is only like driving or playing chess. When certain situations develop there is a recognised strategy for both taking advantage of it or avoiding the risks arising. It is the ability to fine tune your understanding of the environment that makes the difference between success and failure.
