Forex market dynamics

Understand forex market dynamics more by using the diamond formation

Using the various chart patterns is a preferred way to trade for many people. These patterns are not only used to predict market movement but also to understand market dynamics. Some of the common patterns that are observed on a regular basis include the double tops and bottoms, the flags and the pennants etc. Another common pattern is the diamond top. This formation is used to identify the forthcoming shortfalls and downward retracements. The diamond top usually occurs in an uptrend and even though it can be used in every security market with a relatively equal success rate it is particularly useful in the currency market. And this can be attributed to the high amount of liquidity and no gaps in prices of the currency market as compared to the equity market. This pattern can be used with short term charts like the daily or hourly charts or the long term monthly charts.

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