The Weekly Timeframe Diamond Bottom: The Hidden Gem That Most Traders Miss

Most Traders Are Ignoring This Market Reversal Signal—Are You?

Picture this: You’re staring at the charts, hoping for a miracle reversal, but all you get is a market that treats your stop-loss like a bullseye. Sound familiar? Well, buckle up, because today we’re diving into one of the most underrated and secretly powerful reversal patterns—the Diamond Bottom on the Weekly Timeframe.

While the average trader fixates on short-term movements, elite traders are quietly leveraging the weekly diamond bottom for high-probability reversals. If you’ve been stuck in the cycle of premature entries and fakeouts, this might just be the game-changing strategy you need.

Why the Weekly Timeframe? (Hint: It’s Where the Smart Money Plays)

Most retail traders operate on 15-minute or 1-hour charts, obsessing over every tiny candle like it holds the secret to wealth. Meanwhile, institutional traders? They’re chilling on the weekly timeframe, waiting for the market to set up massive moves with precision.

Here’s why trading the weekly diamond bottom beats short-term noise:

• Less Market Noise – Short timeframes are filled with fakeouts, while weekly patterns filter out random fluctuations.
• Stronger Confirmation – A pattern forming over several weeks carries far more weight than an intraday signal.
• Institutional Activity – Smart money (banks, hedge funds) trades longer timeframes, and the weekly chart reveals their moves.

The Diamond Bottom: The Reversal Pattern Hiding in Plain Sight

The Diamond Bottom pattern is like that unassuming friend who turns out to be a hidden genius. Most traders mistake it for a head-and-shoulders, a symmetrical triangle, or worse—just another choppy market. Big mistake.

How to Spot a Diamond Bottom on the Weekly Chart

1. The Expansion Phase: Price action widens, creating higher highs and lower lows in an erratic manner.
2. The Contraction Phase: The range starts to shrink, forming a diamond-like structure.
3. Breakout Confirmation: Price breaks out of the upper resistance, signaling a strong bullish reversal.

This pattern is particularly powerful when it forms at the bottom of a major downtrend, indicating a shift in momentum.

Why Most Traders Miss the Diamond Bottom (And How You Won’t)

Most traders fail to capitalize on this pattern for three reasons:

1. They don’t zoom out – They’re too focused on lower timeframes to see the bigger picture.
2. They mistake it for noise – The erratic expansion phase makes them believe there’s no pattern at all.
3. They lack patience – A weekly formation can take weeks to complete, but the payoff is worth it.

How to Avoid These Pitfalls:

✅ Use multi-timeframe analysis—Identify the pattern on the weekly chart and fine-tune your entry on the daily or 4-hour.

✅ Combine it with volume analysis—Look for increasing volume during the breakout to confirm momentum.

✅ Wait for a clear breakout—A breakout above resistance with strong bullish candles is the green light.

Real-World Example: The EUR/USD Diamond Bottom

Let’s take a real-life case study. In early 2023, EUR/USD formed a textbook diamond bottom on the weekly chart after a prolonged downtrend. While most traders panicked or shorted the minor pullbacks, institutional traders recognized the compression phase and waited.

Once the breakout occurred, EUR/USD skyrocketed by over 800 pips in just a few weeks. Those who spotted the setup in advance capitalized on an easy risk-to-reward ratio of 1:5 or more.

Step-By-Step Guide: How to Trade the Weekly Diamond Bottom

Here’s your cheat sheet to making high-probability trades using the weekly diamond bottom:

1. Identify the Pattern: Use weekly charts to spot the expanding-constricting structure of the diamond bottom.
2. Check Volume & Momentum: Look for a decline in volume during contraction and a surge at breakout.
3. Confirm the Breakout: A bullish close above resistance with strong volume is the confirmation.
4. Set Your Entry & Stop-Loss:
   • Enter on the first retest of the breakout level.
   • Place stop-loss below the last swing low inside the pattern.
5. Target Higher Timeframe Resistance: Aim for key swing highs or Fibonacci levels for profit-taking.

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