Bull Flag vs Bear Flag – How Do You Use Them to Your Advantage?

There are numerous reasons why crypto trading has become so popular. When performed right, crypto trading can have surprising results.
You surely know that you cannot simply trade crypto without analyzing market trends and having at least basic trading knowledge.

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The crypto market is still highly volatile, and a wrong move can lead to significant losses. The good thing is there are some technical analysis patterns you can follow to make informed trading decisions. In this article, we will talk about bull and bear flags, some of the most popular continuation patterns in the field.

Crypto Trading, Shortly

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Crypto trading implies speculating in the price movement of a cryptocurrency through a CFD trading account or buying and selling crypto on a specialized exchange. There are multiple styles of crypto trading, just like there are for regular stock trading.

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You can choose swing trading and follow short-term trends, but this type of trading might be recommended for more experienced traders. With swing trading, you can make more informed decisions, and believe it or not, it takes less time to perform swing trading than day trading. All you need is discipline and a good trading strategy.

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Another popular trading style is called position trading, but it is also known as “trend trading.” Position trading implies purchasing tokens and holding them for longer periods of time. This type of trading might be easier to learn, but you will get rather long-term profits, so don’t expect to earn profits right after you start trading.

What Is a Bull Flag Pattern?

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Bullish flag is a continuation pattern that occurs when the price of a cryptocurrency has a sudden increase, followed by a period of consolidation and a possible trend continuation. The pattern is considered to be bullish because the flag suggests that there might be followed by an increase in price.

The bull flag chart pattern formation is characterized by parallel trend lines encapsulating the consolidation phase. The upper trend line acts as resistance, while the lower trend line functions as support

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During the formation of a bull flag, it’s common to observe a decline in trading volume. This decrease signals a change in market activity during the consolidation, indicating a potential calm before a new surge in buying interest.

Thus, in a bullish flag pattern, the trend continuation implies that the price increases.

What Is a Bear Flag Pattern?

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The bear flag chart pattern is a significant technical indicator, being considered a precursor of a prevailing downward trend. Simply put, the bull flag and bear flag patterns are somehow similar; only bull flag patterns have their flag pole indicating a downtrend, while bear flag patterns are just the other way around.

A bearish flag pattern usually occurs after a sharp and rapid price decline, forming the flag pole and then a consolidation period characterized by a flag. Just like the bull flag pattern, the bear flag involves parallel trend lines, with the upper trend line acting as resistance and the lower one being the support line.

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During the formation of a bear flag pattern, traders usually monitor the trading volume. A decline in volume during the consolidation phase may be often noticed, showcasing a reduction in market activity and a temporary pause before a potential further downward trend.

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In case of a bear flag pattern, traders might also rely on technical analysis and the Relative Strength Index to measure the strength of the bearish trend during the consolidation

BULL FLAG vs BEAR FLAG PATTERN

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The main difference between bear and bull flags is represented by their implication for market evolution. Bull flags showcase a potential price increase, while bear flags suggest a continuation of a downtrend. Each type of flag pattern requires different strategies and approaches.

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To be Continued...