What it is
A bull flag is a brief orderly pause inside a strong advance: a near-vertical move up, the flagpole, followed by a shallow drift lower or sideways in a tight channel, the flag, and then a resumption in the direction of the pole.
How it works
The proportions matter more than the outline. The pole should be a sharp, high-volume advance. The flag should retrace a modest part of it, often less than a third to a half, and should be short in duration relative to the pole, from a handful of bars to a few weeks. Volume expands on the pole, contracts through the flag, and expands again on the breakout. The measured objective adds the length of the pole to the breakout point.
How traders use it
Entries are taken on a close above the flag's upper boundary, or inside the flag near its lower boundary for a better price and a tighter stop below the flag low. The pattern is one of the cleaner expressions of momentum continuation, which is why it appears in discretionary playbooks and in systematic pullback strategies alike.
Where it breaks down
The word flag gets applied to any pullback whatsoever, which strips the concept of meaning. A deep retracement, a flag that lasts longer than the pole took to form, or a flag that drifts upward rather than downward all indicate that the character of the move has changed. And in a weak market the base rate of continuation drops sharply no matter how tidy the shape looks.
Educational reference. This entry describes how a concept is defined and used. It is not investment advice, not a recommendation, and not a signal. Any rule you build from it should be tested with realistic costs before it is traded, and no historical result guarantees a future one.