Diamonds – Patterns not to be missed in the binary options
Binary option trading requires keeping watchful on the trends that occur in the market. There are so many patterns or binary options, to denote different trends. One such patter is the diamond one which denotes the trend reversal of the market. There are many other patterns which are more well known and are powerful than diamonds.
These are the head and shoulders or they may be triple tops and bottoms. These patterns or binary options of analysis are the weapons for the binary traders’ technical analysis and diamonds too should not be ignored. The pattern of diamond may be divided into two – diamond top and the diamond bottom.
In the Binary option trading, diamond tops denote the apex of up trends. These diamond tops are formed when the price in an uptrend stands still and trades horizontally for sometime. The diamond pattern is formed when the vertical short price waves expand at the start of the horizontal trading, becoming taller gradually, before they come back to their own shape in their shorter form.
This expansion cycle creates the shape of a diamond lying on its side. When the narrow part of the diamond top is formed, the trader should expect price to break out to the downside since a diamond is the pattern to denote reversal and not a pattern for continuation trend. Diamond bottoms of the binary options are just like the mirror images of diamond tops.
The diamond bottom marks the lowest point in a downtrend and marks the beginning of an uptrend. The diamond bottoms behave in the same way as diamond tops as far as the contraction and expansion is concerned, except that towards the end of the contraction phase, the binary traders should expect the price to break to the upside down of the diamond bottom.
This is the expected direction and diamond bottoms too are reversal patterns like the diamond tops. In the Binary option trading – the traders use the diamond patterns to reverse the direction of the trading. If the binary traders had been buying using Put options, all day, making money, then the diamond bottom would signal to start buying Calls. Similarly diamond tops would denote the signal to start buying Puts once again.