Flags, Pennants and Continuations
Flags and pennants describe pauses after a directional move. A flag often resembles a small channel; a pennant resembles a compact converging range. “Continuation” describes the hypothesis rather than a guaranteed outcome.
How it works
Specify the initial impulse, pause duration, slope and breakout rule. Exclude future bars from the initial definition. A flag identified only after the trend resumes is a hindsight label, not an event that could have supported an earlier decision.
Worked example
Price rises from 50 to 60, then trades between 57 and 59 for four sessions. A study rule might require a close above 59 after a pause shorter than six sessions. A close at 59.5 meets that trigger; a later decline to 56 is a failed continuation. Adding the initial 10-unit move to the breakout level is a projection convention, not an estimate of an assured price.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Long pauses can become broad ranges. Trend strength, liquidity and news can change before confirmation. Any projection should be accompanied by an explicit invalidation and evidence from failures as well as successes.
Knowledge check
Why include failed continuations in the same dataset?
Read the explanation
Removing them after seeing the outcome selects only successes and misrepresents what the pattern could have delivered in real time.
References and further reading
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.