Investing & Trading

Intraday Flag Formation Strategy

By Samantha Baltodano


TL;DR:

The Intraday Flag Formation strategy helps traders identify and trade a pattern called a Flag on intraday charts. The strategy looks for specific shapes and durations of the Flag pattern and only enters when there's an uptrend and a breakout from the pattern. 


Once a trade is open, the strategy looks for opportunities to exit with a profit or limit losses. 


Remember, no strategy is perfect, so traders should always use multiple tools and strategies. With some practice, the Intraday Flag Formation strategy can be a helpful tool for traders to make smart decisions about their trades.


You can access these Flag strategies here.



What Is The Intraday Flag Formation Strategy?

Intraday trading can be tricky, but the Intraday Flag Formation strategy can help traders attempt to successfully identify, enter, and exit the well-known Flag pattern on intraday charts. This approach was described by Markos Katsanos in his article "Detecting Flags in Intraday Charts."


Intraday flags have the same geometric principles as daily ones, but they’re suggested to conform to more strict criteria, which apply mostly to the shape of flag elements (the pole and the flag itself) and their duration. 


You can customize the criteria based on your trading needs, but the current article discusses their default values.


When the flag is identified, a simulated entry order is added only if:

  • There is currently no open market position;
  • The flag pole height is at least 5.5 times the average true range (ATR) and its formation takes no longer than 23 bars;
  • The flag itself is not wider than 2.5 times the ATR and its formation takes no longer than 15 bars;
  • There is an uptrend before the flag formation and it persists for at least 70 bars;
  • Previous flag formation (if any) occurred at least 50 bars ago;
  • The ATR has changed by at least 5% during the flag formation;
  • A breakout from the formation occurs.


Once there is an open position, the strategy starts seeking exit possibilities. An exit order is added when:


  • Price reaches the profit target equal to 1.2 times the pole;
  • Price reaches the stop loss or the trailing stop loss (both customizable);
  • Inactivity period is longer than 70 bars. Inactivity means that the minimum favorable advance is less than 4 times the ATR;
  • None of the above happens for 100 bars since the entry point.


The Intraday Flag Formation strategy can be a helpful tool for traders to make informed decisions about their intraday trades. 


Remember that no strategy is perfect, and traders should always use multiple tools and strategies when trading. With some practice, the Intraday Flag Formation strategy can be a valuable addition to any trader's toolkit.



Test The Intraday Flag Formation Strategy

You can back test variations of this strategy on historical data for any of your favorite symbols using TradingView. 


While there’s no default script for this strategy, there are customized variations of this strategy ready to be tested and all you have to do is log in and take it for a spin. You can access these Flag strategies here.


If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Intraday Flag Formation Strategy.



Summary

  • The Intraday Flag Formation strategy is a tool for traders to identify, enter, and exit the Flag pattern on intraday charts
  • Intraday flags have stricter criteria than daily flags, focusing on the shape and duration of flag elements
  • Entry criteria include an uptrend before the flag formation, breakout from the formation, and specific durations for the flag pole and the flag itself
  • Exit criteria include reaching a profit target, stop loss, or inactivity period
  • It's important for traders to use multiple tools and strategies when trading, and the Intraday Flag Formation strategy can be a valuable addition to a trader's toolkit with practice.


Intraday Flag Formation is just one of many strategies that Archaide automates. For a full list of strategies and studies available click here.


Like what you read? Check out the rest of our content!