Diamond Top Pattern is the favorite reversal chart pattern in Forex. There are two kinds of diamond chart patterns in Forex world :
Diamond top pattern and
Diamond bottom pattern
Diamond top pattern and diamond bottom pattern are easy to determine on metatrader chart. Determining chart pattern is not very difficult if we understand about technical analysis very well. if you use this pattern on your trading activities you will get better results. Diamond top pattern and diamond bottom pattern are the most trade able chart reversal pattern in Foreign exchange. At least of 4 bounces at support and resistance level should be determined before this diamond top and bottom pattern can be accurate chart formation.
This chart formation is made by expert trader to identify a trend reversal in market price action. The diamond top pattern and diamond bottom pattern are considered as trend reversal formation.
If we using of diamond top pattern in our trading strategy we should consider with risk and reward ratio management, it is best to use stop loss in our trading positions to protect our capital from big losses.
With this chart formation we will find the great trades and make good profit.But in this following paragraph I will share with you about how to reduce false breakout from diamond top pattern and diamond bottom pattern.
First, a time frame can be used to eliminate the false breakout. Usually, we better use 1 hour or 30 min time frame chart to reduce false chart pattern.
Second, another method to eliminate false signal is Stochastic forex technical indicator. You can use overbought and oversold area in stochastic indicator to eliminate false signals from Diamond chart pattern. It will be a great opportunity to trade with diamond top pattern and diamond bottom pattern.
