Flag pattern

It has three parts by convention: the pole, meaning the sharp directional move that precedes it; the flag itself, a shallow drift the other way between two roughly parallel boundaries, usually on thinning participation; and the point at which price leaves one of those boundaries. Duration is part of the definition. A drift that persists is reclassified as a rectangle or a channel, and a drift whose boundaries converge rather than run parallel is a pennant.

The conventional objective adds the length of the pole to the price at which price leaves the flag. That is a drawing convention with a long history and no probability attached to it, and treating the resulting number as a forecast reads more into the arithmetic than the arithmetic contains. Chart readers disagree on the confirmations: whether a close beyond the boundary is required or a touch suffices, and whether a fall in volume through the drift is a condition or an observation.

The problem that runs through every published study of chart patterns applies here in a particularly clean form. A flag is generally only labelled once the break has happened, so drifts that reversed instead are rarely recorded as flags at all. Any record assembled that way is filtered by its own outcome, which is why frequencies quoted for patterns of this kind vary so widely between sources.