Diamond figure (Diamond figure) in English Diamond pattern- is a fairly effective, but rare figure in technical analysis. This pattern forms after a prolonged uptrend or downtrend and indicates a trend reversal. In some cases, this pattern can act as a continuation pattern.
In shape, it resembles a Rhombus pattern, formed by diverging and then converging support and resistance lines. The pattern also resembles the connection of two triangles (on the left - expanding triangle, and on the right symmetrical triangle). Moreover, the formation of a pattern occurs both on an uptrend and on a downtrend.

See examples in the pictures below:

Comment:

It is believed that the formation of a pattern on an uptrend (at the top) is usually shorter in time and is characterized by high volatility compared to a pattern that forms on a downtrend (at the bottom).

Advice:
It is not recommended to trade within a pattern. It is necessary to trade on the breakout of trend lines.

Diamond pattern - Diamond pattern - trading methods

Let's say the price is currently at point “C” (see the picture above).
First, the trader needs to draw two support lines and two resistance lines, as shown in the chart above. Then, on the figure, we determine the highest and the lowest price values ​​- points "A" and "B" (you can also choose the values ​​of the largest concentration of prices). Through points "A" and "B" we draw horizontal lines(line - maximum price value, line - minimum price value). Then, from the breakout point of the pattern (point C), we lay a perpendicular line towards the price breakout at a distance equal to the distance from the maximum to the minimum value of the figure's price (the distance from point "A" to point "B"), that is, draw a line from point " C ”to point“ D ”.

Distance from point "A" to point "B" = Distance from point "C" to point "D"

Further, through point "D" we draw a dotted horizontal line - "Target".
As soon as the price touches the line “minimum price value” at point “E”, open a sell position. In this case, it is better to set the Stop Loss level just above the “minimum price value” line.
Then we wait until the price crosses the horizontal dotted line “Target”. And as soon as the price reaches the “X” point (touches the “Target” line), we close our sell position and fix the profit.

Comment:
You can open a sell position earlier than at point “E”, on a rebound from the support line (new resistance line) from below with a return price movement after a breakout (point M). But this is a more risky strategy.

Exactly the same principle of work on a downward chart of the Diamond pattern (diamond pattern), see the figure below:

H - distance from the minimum to the maximum price value (price accumulation) of the pattern
H = H1,
A - the point of breaking the resistance line up,
B - point of purchase
D - the point of closing the position and taking profit

Peculiarities:
- On charts with a timeframe (time interval) less than 4 hours, the reversal signal is weak or may even indicate a continuation of the trend. On large timeframes (daily chart and above), the Diamond pattern is usually a reversal pattern.
- The longer the diamond pattern was formed, the higher the signal reliability.

There is one rare, but quite effective, Forex market - a diamond figure. The appearance of this pattern on the chart predicts a price reversal, but here the following nuance should be taken into account: if a diamond appears on the charts with the H4 timeframe or less, then the reversal signal is weak, and in some cases the pattern indicates the continuation of the trend. Thus, the diamond pattern, as it is also called by traders, most accurately shows a reversal on charts with a scale of daily and larger.

Now let's look at what this figure is. As soon as after a rather long trend (for example, consider a "bearish" trend) the price begins to fluctuate with an increase in amplitude, and then the amplitude of fluctuations dies out, a diamond appears on the chart. In this case, the upper corner of the rhombus is in the area of ​​the resistance level, and the lower one is near the support line. If, after the price fluctuation has faded, the trend direction has changed and the resistance line has been broken, this is a buy signal. The figure is ideal when the rhombus is correct, that is, the period of price growth equal to the period its decline.

In addition to signals to open positions, using the diamond figure, you can determine the length of the further trend. If you measure the distance from the minimum value of the price inside the diamond to the maximum, and postpone it from the point of breakdown of the support (resistance) level, it will show the place of fixing the expected profit.

Like some other Forex chart patterns, a diamond is not always recognizable. Since it resembles a head and shoulders pattern, there is a risk of opening a position too early, because the head and shoulders show a reversal much later.

Based on the fact, noticed by analysts, that the traders behave differently on “bullish” and “bearish” trends, a diamond pattern that appears at the top of an uptrend turns out to be more volatile than the same pattern at the end of a downtrend.

Figure "Diamond" in Technical Analysis- one of the rarest among. It is also called Diamond (often) and Rhombus (rare). What distinguishes this figure from the rest and how to make money on it? Video tutorial is attached!

Diamond Pattern in Technical Analysis

It forms at the end of both an uptrend and a downtrend. It serves as a signal for a reversal of the existing trend. The Diamond pattern looks like this on the chart, see the screenshot. And pay attention that the figure itself may not look quite correct and beautiful, but even be deformed. This is completely normal and should not confuse you. However, it is believed that the more beautiful the pattern, the greater the likelihood of success in trading on it.

At the beginning of the pattern, the price range is low, expands towards the middle, then contracts again towards the end. From the point of view of technical analysis and psychology of the market crowd, this price behavior is explained as follows, let's take a trend as an example.

After a prolonged uptrend, buying interest begins to decline. This is reflected in the narrowing of the trading range - this is how the left half of the diamond is formed. Then, towards the middle of the figure, some of the traders, having noticed a weakening uptrend, begin to take profits, while the other part, meanwhile, continues to open buy positions. This behavior causes an expansion of the trading range, since there are enough buyers in the market and those who close buy positions (they become sellers). Thus, the middle of the Diamond pattern with a wide price range is formed.

After a while, passions subside and those who wanted to close their positions closed them, and those who started to get into sales have accumulated a position, now the sellers have the advantage. Let me remind you that we are considering the formation of a Diamond in Forex using an uptrend as an example. Since the preponderance now belongs to the sellers, then you and I should join them and start selling. Thus, the formation of the Diamond pattern on Forex is completed and we can talk about a reversal of the uptrend.

Market entry rules

Of course, there are rules for entering the market according to the Diamond pattern, which have been proven for decades. Log in Buy Stop or Sell ​​Stop... Since in the example above we considered an uptrend, the order will be Sell ​​Stop because we are entering sales.

Stop loss set based on the rules, namely - Stop should be approximately 2-3 times smaller than Take Profit. This gives us a positive risk to reward ratio.

Video tutorial

Be sure to watch this video tutorial. In it, you will clearly see the method of technical analysis for the Diamond figure and not only for it. The video also introduces other trend reversal patterns such as, and. Hurry up to familiarize yourself if you want to raise your trade quality new level!

Conclusion

Trading the Diamond pattern in combination with other trend reversal patterns can generate consistent profits if the rules are followed carefully. Study them on our website and may the profit be with you!

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As I promised last time, today, as part of the study of classical technical analysis for stock market I will tell you what happens when an insidious one merges with an equally insidious figure. Although everything is simple here: a rare and poorly studied appears on day cuts Russian shares trend reversal pattern Diamond or Rhombus.

Figure "Diamond" - construction rules

Pattern of technical analysis "Diamond / rhombus"

The "Diamond" figure is outlandish, as the process of its formation takes a long time. Russian stocks are too emotional to stay in limited ranges for a long time. In the literature on classical technical analysis, you can see not only the formation conditions and description of the Diamond or Rhombus pattern, but also find out what, according to the market guru, should be done when quotes leave the formation. Someone measures the diagonal of the figure and postpones one of the boundaries from the breakout point, someone is guided by the size that is actual before entering the figure.

Constructing the "Diamond" figure

I prefer to trade what was and is! That is, I look at past and present charts in order to understand the individual characteristics of the behavior of securities in a given situation. I do not pretend to be the ultimate truth, because it is difficult for me to personally discern Diamonds, and if I see them, then on my working day cuts. On a smaller scale, there may be a slightly different development of events after the pattern, but you yourself will determine this if your trading strategy requires it.

Features of the practical application of the "Diamond" pattern in the Russian stock market

So, what does the “Diamond” pattern look like and how is it implemented on the charts of Russian stocks?

Let's start with the securities that, after the appearance of the Diamonds (Rhombuses), behave most closely to the classical idea of ​​the figures - these are the shares of MMC Norilsk Nickel.

MMC Norilsk Nickel (daily cut): Diamond / Rhombus, February-March 2011.

As you will see in the previous figures, after certain ordeals, the shares of MMC Norilsk Nickel traditionally returned to the beginning of the trend preceding the figure in question. The insidiousness of the "parents" of the figure (the "symmetrical triangle" and the "expanding formation") is noticeable here too. On two of the three charts, you can see the false moves of the stocks before they made a retracement.

However, this is not the worst case scenario. Much more difficult situation after Brilliant developed and is still developing on the chart of Uralkali.

Here the "Diamond" pattern itself seemed to come out of it, but it also carried a "lateral" side. People who, according to the classics, made a bet on the growth of quotations after the breakdown of the resistance line of the Diamond figure, could by the current moment suffer losses of up to 10.4%, and paper profits did not exceed 24%. A year has passed since the exit from the Diamond and the volatility has decreased. The picture has taken on amazing outlines: the old figure has become a piece of a new Diamond. It is better to look at the weekly cut of the issuer.

On the weekly chart of Uralkali's brother, Akron, the Diamond figure from the beginning of 2011 to March 2012 is also visible. And it also flowed into a larger formation.

Akron (weekly snapshot). Diamond in Diamond, 2011 -2013

If you want to try to find the Diamond (Rhombus) pattern yourself, then there are large figures on the common and preferred shares of Sberbank from November 2009 to the beginning of 2013. I am sure you will not pass them by on a daily or weekly cut.

Forgive me for the large theoretical part and a bunch of graphs, but I would like the conclusion to ask you for yourself. It is dangerous to trade within the action of the Diamond pattern. Do not focus only on the breakdown of it or support. Wait for confirmation of the movement from more iconic indicators, or stay away altogether until the upper and lower edges of the Diamond are broken.

Traditionally, I will tell you charts where you can observe the figures presented today and in practice check our conclusions.

VTB daily cut. Diamond / Rhombus, March-June 2013.

The smeared diamond pattern on Novatek is controversial. But the main thing here is not beauty, but the philosophy of shaping the figure.

In the end, let us summarize what signals does the Diamond figure give us? A warning that the securities, where they appeared, will be restless and uncomfortable for both speculators and investors. For understanding people, such a warning is sometimes more important than a clearer signal to buy or sell stocks.