Diamond

First the swings expand, then they narrow. A rare pattern, more often seen at tops.

Author: I. D. Galtsov

Scheme on candles

Diamond — what it is?

A diamond is a rare pattern: the range first expands, then narrows. Visually you get a diamond out of two pairs of lines.

Expansion means rising uncertainty and volatility, narrowing means it is fading. Essentially these are two different states back to back.

In practice the pattern shows up rarely and is almost always recognised after the fact. Its value is more illustrative than anything else.

Drawn with four lines: two diverging and two converging. If you have to stare for a long time to see it, it isn't there.

Hunting for diamonds on purpose. The rarer the pattern, the more often imagination finishes drawing it.

Trading the break out of a diamond without structure.

Confusing the expanding part with a range.

Treating the pattern's rarity as a sign of its reliability.

range: movement inside a horizontal corridor with no clear direction.
volatility: how far price swings over a period. High volatility means big moves in both directions.
long: buying in expectation of a rise.