I was hoping to cover all triangles first before I move on to 'Diametric' but since in todays post mentioned the possibility of Markets making a 'Diametric pattern', let me explain it today itself.
Diametrics are corrective patterns and once they are complete the price tends to move sharply in opposite direction ( similar to triangles). But unlike triangles Diametrics have 7 legs and are extremely difficult to trade. Difficulty arises from the price movement. Just when you think a new high is formed price will start moving down and just when you think you have a new low price will again start moving up and to complicate matter further, Diametrics have 2 shapes and its very difficult to identify them till they are almost on the verge of completion.
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| 7 legged Diametric Pattern |
Point to note:
- Diametrics have two types: A) Bow type i.e. contracting first and expanding later and B) Diamond shaped i.e, expanding first and contracting later.
- Price move in opposite direction once pattern is complete and its usually very fast
- Price action that follows after diamond type completion is usually faster than bow types ( so diamond type are more bullish/bearish)
- In case of Bow type the G leg can cross or end below E leg. if it ends below E leg or in other words fail to cross high of E leg then its called as 'G failure'
- If G leg does end as a failure then the price action which follows is very very sharp. sometimes its so sharp that it doesn't even allow traders to enter into a trading position
- Both these patterns can also be read as 'double corrective' i.e, ABC-X-ABC ( however I prefer to read them as one)
- Diametrics basically signal confusion which is there in the markets which is explained by overlapping price movements and once the confusion is cleared i.e. diametric is complete, what follows is a clear trend
- And like all patterns diametric too can be found in both Bull and Bear markets. Above example is a Bear market example ( since prices are expected to move down once G leg is complete)
- Time action between most legs can be similar (i.e. all or most legs might last for same number of days)
very wonderful experience Rahul ji with you thanks for sharing with us you valuable experience without any charge great
ReplyDeleteyou have great ideas rahul ji one request if you give an example of any stock market about this diamond and bow patterns along with this then it's better for us thank you very much rahul ji
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DeleteBow types diametric are very common in our markets, reason being we are in complex corrective moves for many years. The upmoves we have been seeing post 2017 is basically one big bow tie type diametric only. Just carefully observe the charts from 2017 (nifty 8000) to 2018 (nifty 11750). Entire move is one big diametric pattern only with G leg finishing at 11750.(so yes diametric can last for years and they are very very difficult to trade thats you would notice very few traders have made money in last 2 years in stock market)
Can you describe Bow and arrow and diamond pattern in details. I means the calculations and relationship of ABCDEFG waves in both diametric patterns
ReplyDeleteWhile bow-tie shows contraction first and expansion later, the diamond pattern expand first and contract later. There is no fixed calculation as these patterns are difficult to identify (since these are corrective patterns and not impulsive). Only thing is that usually most leg consumes similar time. So instead of focusing on price, focus on time.
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