A forex trading continuation strategy focuses on identifying moments when a strong trend pauses briefly before continuing in the same direction. Unlike reversal strategies that bet on a change in direction, continuation strategies aim to ride the trend further by entering at optimal consolidation points. This approach is highly effective for momentum traders seeking to align with institutional flow.

What Is a Continuation Strategy in Forex?

A continuation strategy assumes that once a trend has been established, it’s more likely to persist than to reverse. Traders look for price consolidations, flags, pennants, and retests of key support or resistance levels to signal entry points that align with the prevailing trend.

Key Continuation Patterns in Forex Trading

1. Bullish Flag

• Appears after a strong upward move
• Short consolidation in a downward-sloping channel
• Breakout signals trend continuation to the upside

2. Bearish Flag

• Follows a steep downtrend
• Temporary consolidation in an upward-sloping channel
• Breakout downward resumes the trend

3. Pennant

• A brief consolidation in a symmetrical triangle after a strong move
• Small in size, low volume
• Breakout follows the same direction as the initial trend

4. Ascending and Descending Triangles

• Continuation patterns formed by horizontal and sloping trendlines
• Often break in the direction of the trend after multiple touches

Indicators That Support Continuation Strategies

• Moving Averages: 20 EMA or 50 EMA can act as dynamic support/resistance in a trend
• MACD: Signal line crossover aligned with the trend confirms strength
• RSI: Stay cautious when RSI hits extremes, but mid-range bounces can confirm continuation
• Ichimoku Cloud: Kumo breakout in trend direction supports continuation setups

Mid-Article Strategy Tip

In our Forex Course, we teach traders how to identify continuation patterns on live charts using a combination of candlestick analysis and volume confirmation, with exercises that simulate institutional order flow.

Steps to Trade a Continuation Strategy

1. Identify the prevailing trend using higher timeframes (H1, H4, Daily)
2. Spot a continuation pattern (flag, pennant, triangle)
3. Wait for a breakout in the direction of the trend
4. Confirm with indicators (MACD crossover, volume surge, moving average bounce)
5. Enter on breakout retest or immediately post-breakout
6. Set stop loss below pattern (for longs) or above pattern (for shorts)
7. Target previous swing high/low or project measured move (height of the pattern)

Key Takeaways

• Continuation strategies aim to capitalise on trend strength
• Common patterns include flags, pennants, and triangles
• Use multiple timeframe analysis to confirm the dominant trend
• Entry after breakout or retest maximises risk-reward
• Indicators can help confirm the momentum and breakout validity

Fundamental vs Technical Continuation Strategy

Element	Fundamental Trader	Technical Trader
Entry Basis	News flow or macro continuation	Breakout of pattern (e.g. flag/pennant)
Confirmation Method	Central bank guidance, data trend	Candlestick + indicator + trendline confluence
Timeframe Preference	Daily to weekly	H1 to H4 most common
Example	Long USD during Fed tightening cycle	Buy after bullish flag breakout

Case Study: Continuation Pattern on EUR/USD

David, a swing trader in Singapore, identified a bullish flag on EUR/USD during a European Central Bank policy tightening cycle. Price had surged 150 pips in a day, followed by a two-day flag formation. He entered long on the breakout above the flag with a stop 20 pips below the structure. The trade yielded a 2.5:1 reward-risk ratio as EUR/USD continued its upward path fuelled by hawkish ECB remarks.

Frequently Asked Questions

What is a continuation pattern in forex trading?

It is a chart formation that suggests the existing trend will resume after a brief pause or consolidation.

Is a breakout strategy the same as a continuation strategy?

Not exactly. Breakouts can happen in both continuation and reversal patterns. Continuation strategies specifically aim to follow existing trends.

What timeframe is best for continuation strategies?

H1 and H4 are popular for intraday and swing traders. Daily charts are more suited for position traders.

Which currency pairs are ideal for continuation trading?

Major pairs like EUR/USD, GBP/USD, and USD/JPY offer reliable volume and trend structure, making them ideal for continuation setups.

How can I confirm a continuation breakout is real?

Look for volume spikes, candlestick confirmation (like bullish engulfing), and alignment across multiple indicators.