Technical Glossary / Chart Patterns
Diamond Bottom
A broadening swing that then contracts, forming a diamond at the end of a decline.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
A diamond bottom is the bullish mirror. After a decline, swings expand and then contract into a diamond. A close above the upper right side completes the reversal pattern.
How to identify it
A low area where ranges first widen, then tighten, with a four-sided outline. The prior trend should be down. The right half should look like a small triangle.
Bullish reading
The long trigger is the upside break of the contracting side. Risk under the latest swing low inside the pattern.
Bearish reading
A downside break says the diamond was only a pause in the decline.
Common mistakes
Naming a diamond before the contracting half exists. The broadening alone is a megaphone, which is a different pattern.
Limitations
As with diamond tops, the shape is easy to imagine. If the four touches are not obvious without forcing the lines, skip the name.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.