A flag is a pause that leans against the move
A sharp move up, then a narrow channel drifting gently down. The drift is shallow and orderly, and the whole thing is small compared to the move that made it. That combination — a violent move followed by a calm, slightly-against-it drift — is what says the sellers arriving are not enough to turn it, only enough to slow it.
A pennant is a flag that narrows
The same idea with converging lines instead of parallel ones: each bounce is smaller than the last, and the range squeezes to a point. Practically you trade it the same way. The difference between a flag and a pennant is a naming argument, not a trading one.
Triangles, and which ones actually say something
An ascending triangle has a flat top and rising lows: buyers keep paying more while sellers hold one price, and that is genuinely informative. A descending triangle is the reverse. A symmetrical triangle has both sides converging and says almost nothing about direction — it is a coiling range that can break either way, and treating it as bullish because it appeared in an uptrend is reading the trend, not the triangle.
Wedges, which lean the wrong way
A wedge is a triangle whose two lines slope the same way. A rising wedge in an uptrend — both lines rising, but the lows rising faster than the highs — is a squeeze in which buyers are working harder for less, and it usually breaks downwards, against the trend. A falling wedge does the reverse. That is what separates a wedge from the other shapes here: a flag or a triangle usually continues the move, a wedge usually does not, so calling one by the other name gets the direction backwards.
Where the trade is
The entry is the break of the pattern boundary in the direction of the prior move, the stop goes on the far side of the pattern, and the usual target is the length of the move that came before it, projected from the break. Because these shapes are small, the stop is small — which is the real reason they are worth waiting for. A tight stop is what makes a modest target worth taking.
What breaks the idea
Two things. If the pause is bigger than the move that made it, or takes longer than the move that made it, it has stopped being a pause and become a range. And if the drift retraces most of the move rather than a third or so of it, the sellers are not a pause; they are the other side arriving. In both cases the pattern name still fits the picture and the reasoning behind it no longer does.
In short
| Flag | Parallel channel drifting against the move |
|---|---|
| Pennant | Converging version of the same thing |
| Ascending triangle | Flat top, rising lows |
| Symmetrical triangle | No direction of its own |
| Rising wedge | Both lines up — usually breaks down |
| Usual target | The length of the prior move, from the break |
Common questions
Is a symmetrical triangle bullish or bearish?
Neither. It is a range that is getting tighter. Any direction you assign to it comes from the trend around it, so say that instead — it keeps you honest about how much the pattern is really telling you.
How long should a flag last?
Shorter than the move it follows. There is no candle count that matters, but once the pause outlasts the move it interrupted, the market has changed its mind about being in a hurry.
Can I enter inside the flag instead of waiting for the break?
You can, and you get a better price and a worse trade. Inside the pattern you are guessing which way it resolves; at the break you are paying a little more for the answer.
Is a wedge a continuation pattern?
It is grouped with them because it looks like one, and it behaves like the opposite. A rising wedge inside an uptrend usually breaks downwards. If you cannot tell a wedge from a flag, wait for the break rather than guessing the direction from the name.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.