Regarding reversal points in forex trading, this is something many traders dream of finding. Because if we can identify the true reversal point, the price will give the best entry in that round. But the problem is that guessing the reversal point by eye or news alone is too risky, so indicators are used to help.

I observe that most professional traders prefer using momentum indicators because they help show whether the price is weakening or gaining strength. But what to watch out for is when the market is very strong, indicators might give overbought or oversold signals repeatedly, and then we can easily sell the dip.

A better way is to look for divergence—that is, checking whether the price and momentum are contradicting each other. If they conflict, that’s a sign that a reversal might be coming.

RSI divergence is a classic method. I look when the price makes a new high but RSI doesn’t make a new high accordingly. This is called bearish divergence and indicates that the upward momentum is waning. Conversely, if the price makes a new low but RSI doesn’t go lower, that’s bullish divergence, suggesting the downward strength is weakening.

MACD divergence is another one I like to use. It indicates both trend and momentum. I look at the MACD histogram to see if it’s increasing or decreasing. If the price hits a new high but the MACD histogram keeps decreasing, that’s another bearish divergence.

OBV divergence also considers volume. If the price keeps rising but OBV is trending downward, it indicates that during the high price, there are actually more sellers, which is a forex reversal signal we’re looking for.

To use these indicators seriously, you need to understand their limitations. It’s not enough to see divergence and jump in immediately. You should wait for the price to move in accordance with the signal before deciding to enter.

If you want to practice using these indicators, I recommend MiTrade because it has a comprehensive set of indicators—from SMA, EMA, MACD, RSI, Bollinger Bands, ATR to CCI. Importantly, it offers a free demo account with 50,000 virtual funds so you can try forex trading without risk. You can open an account in just 3 minutes, choose your preferred currency pairs, and start practicing right away.

In summary, identifying forex reversal points through divergence is a practical technique. But you need to know how to use it correctly. Practicing with a demo account greatly helps improve your trading skills.