Mastering Price Action: Flags, Pennants, and Wedges

🚩Flags are upward or slightly downward sloping channels that provide high probability trading opportunities. Wait for a channel breakout to occur and set your stop at the low of the opposite side of the channel.

🏁Pennants have distinct flat lows connected by downsloping lines. Look for three tests at least of the lows and ideally two tests of the highs. Trade the breakout above the high of the trend line.

🔼Wedges are highly volatile patterns that break in either direction with a fast and powerful sustained move. Identify flat lows and downsloping highs. Look for an abrupt and aggressive volatility expansion out of the wedge.

How do I identify a flag pattern?

—To identify a flag pattern, look for distinct tests on the top and bottom of the flag and a clear starting point. Flags are upward or slightly downward sloping channels.

What is the best entry strategy for a pennant breakout?

—The best entry strategy for a pennant breakout is to buy above the high of the downtrend line. Set your stop below the downtrend line and expect a fast and powerful move to the upside.

Do wedges always break in the direction of the trend?

—No, wedges can break in either direction. It's important to wait for a clear and aggressive volatility expansion out of the wedge before taking a trade.

Are flags, pennants, and wedges suitable for all time frames?

—Flags, pennants, and wedges are more reliable on higher time frames. They provide high probability trading opportunities and are visually clear and distinct.

Can flags, pennants, and wedges be used in conjunction with other technical analysis tools?

—Yes, flags, pennants, and wedges can be used in conjunction with other technical analysis tools like support and resistance levels, moving averages, and candlestick patterns to increase the probability of a successful trade.

00:00In this video, we will discuss three high probability price action patterns: flags, pennants, and wedges.

00:40Flags are upward or slightly downward sloping channels that require proper identification of the top and bottom. Wait for a channel breakout to occur and set your stop at the low of the opposite side of the channel.

02:46Pennants have distinct flat lows connected by downsloping lines. Look for three tests of the lows and ideally two tests of the highs. Trade the breakout above the high of the trend line.

05:53Wedges are highly volatile patterns that break in either direction. Look for flat lows and downsloping highs. Trade the breakout above the high of the downtrend line and expect a fast and powerful move.