I just realized that many people may still not understand how to identify the appropriate reversal points for trading. Most of us tend to rely solely on intuition or news, which is very risky if the market moves strongly.

In fact, professional traders often use indicators to help identify reversal points, especially by looking at Divergence, which is a fairly accurate technique. I want to share the 3 most commonly used indicators.

The first is RSI Divergence. This works by checking whether the RSI enters the Overbought zone (above 70) or the Oversold zone (below 30). If the price makes a new high but the RSI does not follow, that’s a divergence signal (Bearish Divergence), indicating that the upward momentum may weaken. Conversely, if the price drops but the RSI starts to rise, that’s Bullish Divergence, suggesting a potential reversal point.

The second is MACD Divergence. This looks at the MACD Histogram. If the price rises but the Histogram decreases, it shows that the upward momentum is weakening. This is an interesting signal for identifying reversal points and can be used to gauge both momentum and trend.

The third is OBV Divergence. This examines volume. If the price rises but OBV decreases, it indicates that selling is gradually happening, meaning the current rally is unstable. Conversely, if the price drops but OBV increases, it shows buying back in, which is a good signal for an upward reversal.

A key tip is not to rely on just one indicator. Try to observe Divergence across multiple indicators together because when the market trend is strong, overbought or oversold conditions usually last for a while. Therefore, looking at Divergence between price and momentum or volume is a safer approach.

Now that you know these 3 indicators, try applying them in a demo account first to better understand how to identify reversal points. The more you practice, the more you’ll understand how each indicator works and whether the reversal will come before or after.