The RTM diamond pattern is one of the core setups in RTM that misleads buyers and sellers when market-makers and large financial institutions are gathering liquidity.
Definition of the Diamond Pattern
The RTM diamond pattern is a reversal setup that usually forms at key market tops and bottoms. It appears once the Quasimodo (QM) pattern has been violated.
For the pattern to form, price must revisit the QM Zone without reacting in a Quasimodo manner and must instead sweep traders’ stops.On the next move, after collecting those QM stops, price reverses direction and the diamond pattern RTM materializes.
In a Diamond Pattern in RTM Style, the stop-losses of five groups of traders are triggered:
- Sellers at the first high
- Buyers at the first low
- Sellers at the second high
- Buyers at the second low
- Sellers within the QM Zone
How to Spot a Diamond?
To identify the RTM diamond pattern, you need solid knowledge of RTM supply-and-demand zones so that you only act when the setup appears in a valid price area.
Typically, the RTM diamond pattern shows up when price has yet to reach the main supply or demand zone and the Quasimodo fails to confirm.
Put differently, a fake QM forms before price taps the primary zone; After liquidity is taken, the diamond forms and a trend reversal follows.
Trading Steps for the Diamond Pattern
To trade the RTM Diamond Pattern, you should follow these steps:
- Identify primary supply and demand zones;
- Spot the QM pattern;
- Watch for QM violation and a compressed price (CP) move inside the QM Zone;
- Look for a fake break or aggressive price reaction;
- Enter in the direction of the new trend.
#1 Identify Primary Supply and Demand Zones
To mark core RTM zones, you must master elements such as FTR, Flag, DP and more.
After plotting a zone, ensure price actually taps it—even a single-pip penetration counts.
#2 Spot the QM Pattern
Next, price should form a QM before reaching the zones. Traders unsure of their levels often trade the Quasimodo; When that stop is hit, the odds of an RTM diamond pattern rise.
Note that sometimes a QM stop-out is inevitable and becomes one of the clues for the diamond.
#3 QM Violation and CP Move Inside the QM Zone
In most cases, during the QM violation, price compresses (CP) inside the QM Zone, then sweeps stops.
A CP move here is a strong hint that a diamond pattern RTM may follow.
#4 Fake Break or Aggressive Reaction
After violating the QM, price must sweep stops via a fake break or aggressive candles with long wicks.
That sweep provides the liquidity banks and institutions need, and the new trend kicks off.
#5 Enter in the New Trend Direction
Post fake-break, price reverses with strong momentum. Using candle confirmation or technical indicators, you can enter and place the stop behind the high/low created by the fake break.
Take-profit for the RTM diamond pattern sits at subsequent SR levels, anticipating a sustained trend reversal.
Example Trade with the Diamond Pattern
Below is another bullish-reversal example after an RTM diamond pattern forms:
Key Points When Using the Diamond Pattern
When using the RTM Diamond pattern, keep the following points in mind:
- When the QM hasn’t yet reached the primary supply/demand (FL, DP, FTR, etc.), the RTM diamond pattern becomes likely;
- When confidence is low that price will hit the primary zone, trading the QM is recommended;
- Professional traders, once stopped out on the QM, look for the diamond pattern RTM to appear and trade it;
- To confirm, wait for the nearest minor SR break; you can also use additional technical analysis signals;
- After sweeping QM stops, price usually reverses with higher momentum—another clue that the Diamond Pattern in RTM Style is forming.
Conclusion
The RTM diamond pattern is a prime reversal setup that usually forms at major highs and lows. It reflects sophisticated liquidity grabs by large institutions.
The formation appears after a Quasimodo violation; once QM stops are swept, price often powers into a new trend.
When traded correctly, the pattern offers attractive risk-to-reward (R:R) opportunities.
