Rhombus figure sometimes occurs on the binary option chart. Depending on its location, the figure gives a signal to purchase binary options. If the graphical analysis model takes place on the top of the market, a downward reversal may occur soon.
Consequently, after the lower bound is broken through, a trader can purchase option Put. On the other hand, if the Rhombus appears at the bottom, the upward reversal will probably happen soon. In this case, you should wait for breaking through the upper face of the rhombus and buy a Call option.
Sometimes, a figure of technical analysis called the Diamond, or, more commonly, the Rhombus, occurs on the binary option chart. The pattern contains levels of support and resistance, moving parallel to each other. A trader should know that upon closer view, this figure deceptively looks like a standard triangle.
We must remember though, that the ordinary triangle is formed with three vertexes and the Diamond’s second part, which narrows dextrally, may contain only two vertexes. However, some experts of the technical analysis consider the Rhombus exactly as two triangles. Thus, the appearance of the Rhombus on the graph is possible both at its bottom and at the top.
If a figure of technical analysis “Rhombus” (or sometimes it is called “Diamond”) appears at the top of the price graph, you must expect that the market will turn down any time soon. Therefore, if the rhombus is formed at the bottom of the market (i.e. at the bottom part thereof) a trader should expect that the market turns upwards.
It is important to remember that if we consider this figure at the younger periods of time, it can announce a trader not about a trend reversal, but about the continuation of the current price trend. That is, for example, if such a pattern is formed on the five-minute graph, we should not jump to conclusions that the market will soon reverse. On longer time scales, the formation of this figure takes correspondingly more time, but it will announce that the price is ready to reverse.
Often, the formation of this pattern occurs at the top. At the same time, the volatility is significantly increased in the market. This is due primarily to the fact that psychologically the market participants’ approach to the purchase or trading is completely different.
Signals for binary options purchase can be made not only at the break of one of the lines that form the rhombus. They may appear during some changes, for example, the drop height of the resistance line or distortion in the formation of the second half of the figures (if the line does not reach a peak of the resistance line and a reversal occurs somewhat earlier). This applies to both figures in the formation of the upper part of the graph that is both on the market top and bottom.
Trading b. o. with the help of Rhombus strategy is simple enough. If such figure of technical analysis has appeared at the bottom of the market, the trend will probably reverse upwards. However, the purchase of a Call option is recommended only when the upper bound of this figure is broken. The same actions, but on the contrary, should be taken when the figure is on top of the market. In this case, you must wait for breaking the bottom edge top down, in order to purchase option Put. Of course, a trader should carefully track if it is Rhombus figure formed on the graph.
That’s all for now. Got any questions? Just ask the expert!