True Strength Index + Diamond Bottom: The Hidden Path to Profits

The True Strength Index & Diamond Bottom: The Hidden Path to Profitable Forex Trading

When it comes to Forex trading, the True Strength Index (TSI) and Diamond Bottom pattern might just be the underdogs of technical analysis. They’re like those “hidden gem” coffee shops that make better lattes than the big chains, yet few know they exist. Well, consider yourself one of the few. Today, I’m about to reveal how these two unlikely heroes can change your Forex game for good.

True Strength Index: Not Just Another Indicator

Okay, let’s talk about the True Strength Index (TSI). I know, I know—the name sounds like something from an 80s motivational poster. But hear me out. The TSI is actually a momentum oscillator that helps traders figure out how strong a trend is. It’s kind of like that friend who gives you a reality check when you’re trying to decide if you should buy a pair of jeans—it helps you tell if something’s truly worth investing in.

TSI measures the difference between price changes over two time periods, giving you an idea of whether the trend is likely to continue or run out of steam. And unlike some other indicators that tend to be as fickle as a toddler in a toy store, TSI is known for being a bit more reliable. It’s like a steady friend who’s always got your back.

Why Most Traders Ignore It And Why You Shouldn’t

The True Strength Index doesn’t get the love it deserves. Why? Maybe because it’s not as flashy as the Relative Strength Index (RSI) or as trendy as the Moving Average Convergence Divergence (MACD). But here’s the thing—that’s what makes TSI a gem. It’s like driving a minivan: you might not get any admiring glances, but you’ll definitely get to your destination safely.

The TSI is especially effective at detecting subtle shifts in momentum. Think of it as a magnifying glass that allows you to see tiny clues in the market that other traders are missing. And in the world of Forex, being ahead of the crowd is half the battle won.

Diamond Bottom: The Underdog Chart Pattern

Now, let’s get to the real star of this show: the Diamond Bottom pattern. This one is so rare, it’s like spotting a unicorn riding a unicycle. But when you do spot it, it could mean serious profit. The Diamond Bottom forms when a market that was previously in a downtrend starts to show signs of reversing. It starts off looking a bit like a broadening pattern (you know, like those family arguments that seem to get louder and louder), but then it narrows back down.

Think of the Diamond Bottom as the market’s way of saying, “Alright, enough of the drama. Let’s get back to business.” When this pattern forms, it signals that a major reversal is about to happen—and if you know how to ride that reversal, you could be in for a big win.

How to Combine the True Strength Index with the Diamond Bottom

Here’s where the real magic happens. Imagine if you had a cheat code that could help you time the market perfectly. Well, combining the True Strength Index with the Diamond Bottom is kind of like that. The TSI helps you understand the strength of the current trend, while the Diamond Bottom gives you a heads-up that a reversal is coming.

• Step 1: First, look for the Diamond Bottom pattern forming on your chart. This is your clue that the market may be getting ready to reverse.
• Step 2: Use the True Strength Index to confirm the shift in momentum. If TSI is showing positive divergence (meaning it’s moving upwards while the price is moving down), that’s your green light.
• Step 3: Enter your position as soon as you see the TSI cross above the signal line. Set a stop-loss just below the lowest point of the Diamond Bottom for risk management.

Remember, no trading strategy is foolproof—but using the TSI as a double-check for the Diamond Bottom helps you avoid those “fakeouts” that love to chew up traders’ accounts.

Real-World Example: The EUR/USD in Action

Back in mid-2023, there was a prime example of the Diamond Bottom pattern on the EUR/USD daily chart. The True Strength Index began to diverge positively just as the Diamond Bottom was forming. Traders who were savvy enough to notice this pattern could have caught a 200-pip move to the upside. That’s not chump change—it’s more like a hefty grocery shopping trip paid for by the market.

As John Bollinger—creator of Bollinger Bands—once said: “Successful trading is about the intersection of preparation and opportunity.” With the True Strength Index and Diamond Bottom combination, you’re prepared to capitalize on opportunities others might miss.

Why This Combination Works

So, why does this dynamic duo work so well? It’s because they balance each other out. The Diamond Bottom is like the flashy attention-grabber, showing you where a big move could happen. But the TSI is the rational one, confirming that the move is real and not just market noise.

It’s like when you’re deciding whether to jump on a new trend. The Diamond Bottom yells, “Everyone’s doing it!” while the TSI calmly assesses whether it’s actually a good idea. And honestly, we could all use that kind of voice in our lives—especially when considering trades.

Avoiding the Pitfalls: How Not to Get Fooled

If there’s one thing I’ve learned in Forex trading, it’s that the market loves to play tricks. One minute you’re thinking you’ve got it all figured out, and the next minute you’re the victim of a nasty fake breakout. With the Diamond Bottom, the risk of getting caught in a fakeout is real—but that’s where the True Strength Index comes to the rescue.

Use the TSI to confirm what you see on the chart. If the TSI isn’t confirming the reversal, take a step back. It’s like when your GPS says “turn right” but your gut tells you that’s a dead end. Trust your gut—or in this case, trust the TSI.

Expert Quotes: Learning from the Best

One of the greats, Alexander Elder, once said: “The market is like an ocean, always moving.” He emphasizes that we need reliable tools to navigate these waters—and the True Strength Index is one of those tools. Elder’s take is clear: follow indicators that show you what’s beneath the surface.

Another expert, Linda Raschke, known for her expertise in market patterns, pointed out that “the value of pattern recognition lies in the trader’s ability to determine whether a particular price movement is significant.” By using the TSI alongside the Diamond Bottom, you’re adding that extra level of significance—giving you a huge edge over traders who only look at the surface.

The True Strength Index and the Diamond Bottom pattern might not be the flashiest tools out there, but they sure do pack a punch when used together. Think of this combo like a secret weapon—it’s not about being showy; it’s about being effective. The next time you’re scanning charts, don’t ignore these two. They just might help you catch that big reversal everyone else misses.

If you’re ready to learn more about these advanced methodologies, be sure to check out our Forex education resources for deep dives and expert analysis. And if you want to connect with other traders who are uncovering hidden opportunities in the market, join our StarseedFX community today. Because, let’s face it, trading is better when you’ve got friends along for the ride.

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Image Credits: Cover image at the top is AI-generated