Technical Glossary / Chart Patterns
Diamond Top
A broadening swing that then contracts, forming a diamond at the end of an advance.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
A diamond top is a bearish reversal built from a short broadening formation followed by a symmetrical triangle. The outline looks like a diamond: expanding swings, then contracting swings, after a rally. A close under the lower right side completes it.
How to identify it
Higher highs and lower lows, then lower highs and higher lows, sitting on top of an advance. You should be able to see four sides. A plain triangle is not a diamond.
Bullish reading
An upside break of the upper right side fails the bearish diamond and can continue the rally that preceded it.
Bearish reading
The breakdown through the lower right boundary is the signal. Risk above the most recent swing inside the diamond. It combines the instability of a megaphone with the decision of a triangle.
Common mistakes
Drawing a diamond around random noise in the middle of a range, with no prior trend to reverse.
Limitations
True diamonds are rarer than charts suggest, because it is easy to connect four swings after the fact. Mark the second half as a triangle only if the contraction is real.
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.