A chart pattern that represents expansion and then congestion.
The diamond is formed by a combination of divergent and then convergent trend lines and could be a top or bottom. It represents expansion in volatility and then a congestion or narrowing of volatility. The congestion represents indecision. A reversal is signaled if the market breaks out of the pattern in the opposite direction of the established trend.
The diamond formation is one of the hardest to draw in real time because of the expanding and then narrowing volatility. In such a liquid market as forex, it is usually not picturesque as examples show, and is rare in occurrence relative to other chart patterns.
