In stock trading, no matter how strong the market is, the stock price trend cannot always rise or fall. There will always be a period of consolidation and rest in the middle. After the long and short parties go back and forth, the winner will be determined. Only then can we decide the next trend. In this process, some regular and followable finishing forms are often formed, such as triangles, rhombuses, flags, wedges, rectangles, etc. Today we will mainly introduce to you the use of flag-shaped finishing forms.

The formation of flag-shaped finishing pattern

Flag-shaped means that the stock price trend is like a flag hanging on the top of a flagpole, which consists of two parts: the flagpole and the flag. Among them, a period of rapid, nearly vertical price rise or fall constitutes the "flagpole" part, and a period of up and down consolidation range constitutes the "flag" part. This type of pattern usually occurs because the market has experienced a rapid rise or fall in a short period of time, and a temporary adjustment is needed before it can decide whether the next trend will rise or fall.

Classification of flag finishing patterns

Rising flag: generally occurs after a rapid, nearly vertical price drop. It consists of two parallel and upward-sloping trend lines. A rebounding consolidation range. When the stock price rises close to the upper trend line, it will encounter strong resistance, and when the stock price falls close to the lower trend line, it will encounter strong support. However, since the overall trend of this range is upward, it indicates that the strength of many parties is temporarily better.

Down Flag: Generally occurs after a short-term rapid price rise. It consists of two parallel and downward sloping trend lines forming a falling consolidation range. Within this range, the strength of the long and short sides is equal, but the overall trend is downward, indicating that the strength of the short side is temporarily better.

Pointed flag shape: The shape is similar to the triangle arrangement. The flag part is composed of two intersecting trend lines. The closer to the tail of the flag, the smaller the amplitude.

Characteristics of the flag-shaped finishing pattern

1. Formation period: It is generally formed in a period as short as 5 days and as long as 3 to 5 weeks, and the finishing time is often not It rarely appears on the weekly or monthly chart for more than 1-3 weeks. Once the consolidation time is too long, for example, if the direction has not been confirmed for more than 3 weeks, be careful of unexpected market reversals.

2. Trading volume: When the price rises or falls rapidly, the trading volume is enlarged; then the price trend pauses for about 1-4 weeks, and the trading volume shrinks; when the flag pattern is finally broken, the trading volume is significantly enlarged and continues. The previous trend or market has reversed.

3. Amplitude: Whether the flag pattern is rising or falling, it usually occurs in the middle of the entire trend, which means that the adjustment amplitude is equivalent to about 30%-50% of the original rising or falling trend.

Buying and selling points of the flag consolidation pattern

Rising flag pattern: Since the previous upward trend will generally continue after the consolidation period, the two buying points are the first time to break through the upward trend. The low point when the trend line is lower than the lower trend line and the low point after the breakthrough needs to be significantly enlarged to confirm; and the selling point is when the lower trend line is broken downwards.

Downward flag shape: After the consolidation period, the previous downward trend will generally continue, so the two selling points are the first time it breaks through the lower trend line and the high point of the rebound after the breakthrough. This situation does not require The buying point is to match the trading volume; and when the buying point breaks through the upper trend line upward, it indicates that the market may reverse.

In addition, considering the possibility of market reversal, it is best to set a certain stop loss and control the position. Hope this helps.