• Flagpole height = 48 pips
• Entry: 10% above flagpole = 5 pips → 1.7103
• Stop loss: 15% below high = 7.2 pips → 1.7091
• First target (25% of height): 12 pips → 1.7115
• Final target (100% of height): 1.7146

This setup provides strong risk/reward by locking in profits early and trailing remaining gains.

Trading Flags Like Pennants

Flags and pennants behave similarly:

• Both start with a strong move (flagpole)
• Both form a tight consolidation (flag or pennant)
• Both break out in the direction of the original move

Entry and stop rules remain the same:

• Entry at 10% above the high
• Stop loss 25% below entry
• First target = amount risked
• Final target = full flagpole height above entry

Importance of Following Rules

Avoid premature entries. For example, if a trader enters at the flagpole high without waiting for the extra 10%, they risk triggering the stop before a valid breakout. This happened in the second GBP/USD example, where an early entry resulted in a loss.

Sticking to the strategy filters out failed breakouts and gives you the edge you need.

Summary on how to trade flag and pennant

Knowing how to trade flag and pennant, you protect yourself from false breakouts while maximizing reward potential. Entry, stop loss, and two-tier profit targets create a system with favorable risk/reward. Never skip setup rules—discipline is your edge.

Keep applying this method to real charts on longer timeframes like 30 or 60 minutes for clarity. In the next lesson, we’ll look at how to manage flag and pennant trades after the breakout.Ready to put this into action? Open your PROP365 account and test this trading strategy with zero delay.