Flag

A lot of TA practitioners only know about flag flag flag and how to draw flag in the chart. About more than half of them totally blur why flag come about. TA is based on human psychological behaviour therefore people always say that "Market never changes because human never changes".

Knowing TA and correlate to human psychology is important as a TA practitioner. Everyone knows how to draw trendlines, resistance & support lines, get moving average (MA) from charting software with simple training. When you say about I am a practitioner of TA, do you really mean so?

I started with TA then come along studied FA for medium term counter analysis. I can't say I am very good but when I was looking at TA at those days I read from the basic, the very basic (even the history, how it comes about... blah blah... can be very useless).

Formation of flag is based on human nature when balancing their greed and fear. It says when a flag is form, eventually it will follows the previous main trend, meaning if a upwards flag is formed eventually it will goes up after "shakes" a little.

Let's talk about Uptrend Flag. Imagine you are part of the market, the first time the price raises to $0.50 you took profit. Then because of a lot of traders have the mentality same as yours the price dips a little but won't break through the first time price you bought because when it retrace a little you will start to buy in as a bargain buy.

You begin to grow greedy, bought again at $0.475 and raises to $0.50 is not enough because every single counter in the mainboard is rising non-stop. Then people like you will push the price slightly higher to $0.55 before taking profit. The cycle continues until eventually it breaks the previous old resistance and traders like you will think sky is limit which will causes a "Breakout".

So, turn the other way round for downwards flag. Just substitute rise with drop, greed with fear, resistance with support.