Diamond Top Pattern
Learn to recognize and trade a diamond top pattern through interactive charts.
What is a diamond top pattern?
A Diamond Top is a bearish reversal pattern, which usually happens after a considerable run-up in prices. It suggests that a downtrend is imminent.
- Verizon (VZ) Diamond Top stocks
- Dogecoin (DOGEUSD) Diamond Top crypto
- EURCAD Diamond Top forex
- EURUSD Diamond Top forex
A diamond pattern can occur over various time frames.
A diamond pattern is encapsulated within 4 trendlines. It starts as an expanding triangle, before morphing into a converging triangle. It can also be likened to a head and shoulders pattern with a ‘V’-shaped neckline.
A diamond has no volume requirements. However, it is common to see trading volumes rise as volatility increases in the first half of the pattern, and fall in the second half of the pattern.
Diamond trading tips
This pattern completes when the price breaks down below support. This breakout should happen on rising volume. Some traders wait for a successful re-test of the trendline before opening a short position, to ensure that support now acts as resistance. You may want to wait for several daily closes below resistance.
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