The Bear Flag Formation is a formation frequently seen in downtrends in technical analysis. This formation occurs in a trend where prices are falling rapidly and is considered a signal for investors that the trend is changing and the declines may deepen further.
The Bear Flag Formation consists of two parts: the flagpole and the flag. The flagpole is the sharp downtrend seen in previous price movements and is the most prominent part of the formation.
The flagpole moves downwards quickly and is suddenly cut off when the sharp decline meets the buy. The working rate of the formations is around 60-65%. A flag is a short price correction move that moves parallel to the flagpole. The flag usually moves slightly up and horizontally along the flagpole, indicating that the trend is in a period of rest.
When the Bear Flag Formation is completed, it occurs when the price starts to fall again after the correction move. The price starting to fall again is confirmed by breaking through the previous lows and falling along the flagpole after the breakout. This confirmation is important for investors and is necessary for the correct recognition of the pattern. Correct recognition of the pattern helps investors take positions that the trend will continue.
The Bear Flag Pattern is a tool frequently used by traders, but it is important to recognize and interpret it correctly. Accurate recognition of the pattern, combined with other market indicators, can help make more successful trading decisions.
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