The Diamond Nobody Talks About (But Probably Should)

If you’ve ever stared at a Euro Australian Dollar chart and thought, “That looks kind of… shiny,” you might’ve just spotted the elusive diamond bottom pattern. And no, we’re not talking engagement rings. This sparkling setup is a market reversal powerhouse, often overlooked because, like a good dad joke, it requires some context and patience to appreciate.

But here’s where it gets interesting: most traders skip it because it doesn’t scream for attention like a head and shoulders or a double bottom. And that, my friend, is exactly why it’s so powerful.

Let’s dig deep into this hidden gem, blend it with the Euro Australian Dollar’s market behavior, and unearth strategies even seasoned traders tend to miss.

Why Most Traders Get It Wrong (And How You Can Avoid It)

Let’s be real: most traders treat chart patterns like they’re at a buffet—piling on everything from flags to triangles, hoping something sticks. But the diamond bottom, with its unique V-then-box shape, is a pattern that demands discipline.

Common Pitfalls:

• Forcing the pattern: Not every symmetrical squiggle is a diamond.
• Ignoring volume: This pattern thrives on volume clues during breakout.
• Late entries: Jumping in after the breakout candle closes 300 pips later is like showing up to a movie halfway through and still expecting popcorn.

Pro Tip: Use the 1H or 4H timeframes on EUR/AUD to catch the diamond bottom in its early form, and always combine it with volume indicators or ATR filters for confirmation.

The Hidden Geometry of the Diamond Bottom (And Why EUR/AUD Loves It)

The Euro Australian Dollar has a reputation for exaggerated moves—it doesn’t just trend, it waltzes across your screen like it’s auditioning for “Dancing with the Forex Stars.”

And guess what? That makes it a perfect candidate for diamond bottoms.

Here’s how the geometry plays out:

• Price drops sharply, forms a volatile base.
• Then, it tightens into a symmetrical range.
• Finally, it explodes upward in a classic bullish reversal.

Insider Tip: According to Kathy Lien, managing director at BK Asset Management, “EUR/AUD is one of the most volatile G10 pairs, often leading to exaggerated reversal setups.” Source

Case Study: EUR/AUD Diamond in September 2023

Remember the Australian employment report in September 2023? Most traders fixated on the headline numbers, but the real play was brewing quietly on the EUR/AUD 4H chart.

Here’s what happened:

• Sharp drop: EUR/AUD plummeted after positive Australian job data.
• Diamond shape formed over 48 hours.
• Breakout came after ECB comments about inflation.

Result: 250+ pip move in under 12 hours. Traders who identified the diamond early had time to set tight stop losses and ride the wave.

Diamond Bottom Strategy Blueprint (Step-by-Step)

This isn’t your average cookie-cutter guide. This is for the trader who’s tired of stale strategies and ready to spot gold in the rubble.

Step 1: Identify a strong downtrend on EUR/AUD, preferably after news-driven movement. Step 2: Look for wide, choppy volatility that begins to compress into a symmetrical range. Step 3: Confirm the diamond shape with four anchor points: two highs, two lows converging. Step 4: Add volume or ATR (Average True Range) to confirm reduction in volatility before breakout. Step 5: Entry triggers when price breaks above the top resistance of the diamond with a high-volume candle. Step 6: Place stop-loss just below the lowest wick in the diamond. Step 7: Set take-profit using measured move projection (height of the pattern added to the breakout point).

How the Smart Money Uses It (And Keeps It Quiet)

Institutional traders love patterns retail traders ignore. The diamond bottom, because it appears disorganized before it forms symmetry, is a prime example.

According to a report by the Bank for International Settlements (BIS), more than 65% of retail traders underperform because they overtrade recognizable setups while missing complex structures. Source

Translation? The pros are watching the mess turn into a diamond while retail is chasing flags like they’re in a Formula 1 race.

What They Won’t Tell You: Contrarian Techniques That Actually Work

You won’t find this in most courses, but here’s a contrarian gem:

Front-run the breakout.

Yes, you heard that right. If you’ve backtested the diamond bottom setup and confirmed the compression phase, a limit order just before the breakout line (with tight SL) can often offer insane R:R ratios.

Pair this with StarseedFX’s Smart Trading Tool to automate your position sizing based on risk and volatility. Try it here

Bonus Tip: Combine with Economic Events

Want to turn up the accuracy dial to eleven? Time your diamond pattern setups around macroeconomic announcements (employment, interest rate decisions, CPI). The EUR/AUD reacts heavily to these, often forming traps that explode into clean reversals.

Track real-time events and get exclusive data from our Forex News Hub at StarseedFX News.

Elite Summary: What You Now Know

You now have access to a strategy that most traders overlook and institutions quietly profit from. Here’s a quick recap:

• The diamond bottom is a rare reversal setup perfect for volatile pairs like EUR/AUD.
• Look for compression after a large drop, and confirm with volume or ATR.
• Use a step-by-step entry plan and always align with macroeconomic catalysts.
• Front-run breakout levels (with tight risk) to unlock insane R:R potential.
• Integrate tools like our Smart Trading Tool for edge amplification.

Ready to Master the Diamond Playbook?

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• Free Trading Plan
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• Join Our Elite Community
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Don’t just follow the herd. Chart your own path. With diamonds.

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