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A bear flag is a bearish continuation pattern. It forms when a sharp sell-off (the flagpole) is followed by a brief upward or sideways consolidation (the flag) that drifts slightly against the downtrend. The shape looks like a flag flying on a pole. It signals the market is pausing before likely continuing lower, and it completes when price breaks down below the flag’s lower boundary.

A bear flag is bearish. It occurs within a downtrend and points to continuation rather than reversal: after a steep drop, price consolidates upward for a short time before sellers potentially resume control. The bearish signal is confirmed when price breaks below the lower trendline of the flag, ideally on rising volume. Like all patterns, it reflects probability and can fail, so confirmation matters.

Traders commonly wait for price to close below the flag’s lower boundary, entering short on the breakdown or on a small retest of that line from below. The measured-move target projects the flagpole’s length downward from the breakout point. A stop-loss is often placed above the flag’s high. Volume usually eases during the flag and expands on the breakdown. CFDs carry a high risk of loss.

Look first for a strong, momentum-driven decline forming the flagpole. Then a modest, orderly consolidation that slopes gently upward or sideways between roughly parallel lines, on lighter volume. The bounce should be shallow relative to the drop; a large recovery suggests a possible reversal instead. The pattern is confirmed only when price breaks downward out of the consolidation, resuming the prior downtrend.

Both are continuation patterns with a flagpole and a consolidation, but they point opposite ways. A bull flag forms in an uptrend, with the flag sloping slightly down, and breaks upward toward higher prices. A bear flag forms in a downtrend, with the flag sloping slightly up, and breaks downward toward lower prices. In short, a bull flag is bullish continuation and a bear flag is bearish continuation.

A frequent mistake is shorting before the breakdown while price is still inside the flag, risking a failed setup if price breaks higher instead. Traders also confuse a strong upward bounce for a flag when it is actually a reversal. Skipping volume confirmation, which should expand on the break lower, weakens entries. Waiting for a confirmed close below the flag and using a stop-loss helps manage these risks.