How To Trade The Bull Pennant Pattern

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Being able to discern these different trends effectively can greatly aid in your trading strategy. Keeping profits and investment in mind involves a balanced understanding of position, number, and money management strategies. This awareness ensures that traders don’t expose themselves to undue risks while aiming for profits. Security and support levels are crucial when dealing with Bull Pennant trading. Traders need to consider the security of their investment platform and also pay attention to the support levels to manage their risks effectively. Market forces such as support, demand, resistance, and prices often interact closely with Bull Pennant patterns.

The price movement within a pennant usually has low volatility, and the breakout from the pattern is typically accompanied by a surge in trading volume. It has a small consolidation period before resuming its move up or down. Day traders, in particular, love the bull pennant pattern because it is one of the most popular patterns for long-bias traders.

  1. The pattern normally lasts anywhere from one to three weeks, and during this time, prices will fluctuate within the trading range.
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  3. To trade the Bull Pennant pattern, traders typically wait for the price to break out of the pennant with a strong volume surge.
  4. In essence, the pennant helps traders identify the stage at which the trend is currently in.
  5. The strongest breakouts occur on high volume, so be sure to look for this when trading this pattern.

This impatience can lead to entering trades during the consolidation phase which increasing the risk of false signals. When the bullish pennant pattern is formed, a strong upward movement is likely to occur when the price breaks above the pennant. Bull pennants are continuation patterns that suggest uptrend extension. As you can see in the EUR/USD chart below, they occur amid north-bound price action.

The pole can represent either the start or the continuation of an uptrend and its size is important when you are calculating where to place the profit target for your buy trade. As shown above, before the flag-like pennant forms, the price experiences a sharp rise. Keep in mind that the markets don’t always move in the way you expect which is why traders should always adopt prudent risk management. To account for this, only ever trade with capital that you can afford to lose.

As with any trade, it is important to have an exit plan before entering into the market. But in the real world, there will be a lot of times where patterns will fail, and false breakouts will occur. I’m sure you’ve heard of the symmetrical triangle pattern, which you can check out in this article here. Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

What is the difference between a bullish pennant and a bearish pennant?

But consolidation can’t last forever, and without enough bullish sentiment to recover, the market turns bearish once more. Once it moves outside of its support line, any sellers who have been holding back jump on – sending it to new lows. In a bearish pennant, strong negative sentiment causes a market to plummet lower (forming the pole). The sellers that have pushed its price down might then back off and take profit, while bulls sense the potential for a bounce back. Bearish pennants and bullish pennants can indicate that major price action is on the cards – so understanding them is crucial for any technical trader.

The pennant portion of the bullish pennant chart pattern is a primary element in this formation. It is a period of price consolidation that tightens from right to left. Bullish Pennants are continuation candlestick patterns that occur in strong uptrends. The Pennant is formed from an upward flagpole, a consolidation period and then the continuation of the uptrend after a breakout. Traders look for a break above the Pennant to take advantage of the renewed bullish momentum.

What is the difference between a bullish pennant and a bull flag?

Each day we have several live streamers showing you the ropes, and talking the community though the action. The Bullish Bears trade alerts include both day trade and swing trade best settings for stochastic oscillator alert signals. These are stocks that we post daily in our Discord for our community members. If the pattern breaks down, going short or taking profit might be appropriate!

quiz: Understanding Rounded top and bottom pattern

The former makes sure that you don’t miss out on a trade as there are no guarantees that a throwback may take place at all. As you can see from the EUR/USD chart above, the throwback never took place, which is not surprising given the overall strength of the initial uptrend. As a matter of fact, they created ten consecutive bullish candles on an hourly chart. The first step in trading the bull pennant pattern is identifying an uptrend.

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The flagpole is the vertical distance between the highest peak and lowest trough. It is created by a sharp increase in price, followed by a period of consolidation. It is important to remember that the pennant should form after an uptrend has already begun. This is because the pattern is often a continuation signal and not a reversal pattern. Paying attention to this context may put the odds in your favor, and ensures that you are trading in line with the trend.

Open an IG demo account to put it to the test with £10,000 in virtual funds. This is for informational purposes only as StocksToTrade is not registered as a securities broker-dealer or an investment adviser. Research plays a critical role in understanding the intricacies of Bull Pennants. It serves multiple purposes, including learning about the effectiveness of different strategies, conducting market analysis, and staying updated with relevant article publications. There are a ton of ways to build day trading careers… But all of them start with the basics.

We will now show you a second method of trading the bullish pennant. Traders should look to enter the trade on confirmation of the breakout after a sudden, sharp move in price. The pennant, after a sharp move in price, indicates that there is likely to be a breakout and continuation in the direction of the initial move. In this article, you will learn how to recognize Pennant chart patterns, what they mean, what causes them and, most importantly, how to use them to place more effective trades. You can get a potential target by taking a measurement from the previous breakout creating the pole, then projecting it from the top of the bull pennant. However, it may also result in missing out on some of the initial gains from the breakout.

Breakouts from pennants often occur in the same direction as the initial move. The target for this setup is set by measuring the height of the flag-pole, which suggests how far prices could rise if they break out from the pennant. Finally, the breakout direction of the triangle can be both upside and downside. This means you can look for either buy or sell setups, depending on the market conditions. First, as mentioned above, the symmetrical triangle pattern often lasts much longer – sometimes several weeks or even months.