Based on my observations, accurately identifying forex reversal points is something every trader must face. Because if you can spot it well, the price will give the best opportunity of the cycle. But the problem is that guessing with the naked eye or relying solely on news information is too risky.

In fact, professional traders use indicators to assist, especially looking at Divergence, which is a fairly effective technique. I’ve seen many people use it without understanding the principles, so I want to share three that I use often.

The first is RSI Divergence. This works by comparing the strength of the price with momentum. When the price makes a new high but RSI does not follow up proportionally, that’s a Bearish Divergence, indicating weakening upward momentum. I often use this as a sell signal. Conversely, if the price makes a new low but RSI does not follow down, that’s a Bullish Divergence, indicating weakening downward momentum and suggesting a buying opportunity.

The second is MACD Divergence. I like this because it indicates both trend and momentum. Look at the Histogram, which is the difference between MACD and the Signal Line. If the price is rising but the Histogram decreases, or the price is falling but the Histogram increases, that’s a conflicting signal, often leading to a reliable forex reversal point.

The third is OBV Divergence. This looks at trading volume. When the price makes a new high but OBV shows a downward trend, it indicates that some traders are gradually selling off, making the price rise unstable. Conversely, if the price makes a new low but OBV increases, it suggests buyers are returning, and the downward move is unstable and likely to reverse.

The important thing I’ve learned is not to rely on just one indicator. You need to accurately interpret Divergence, which means comparing the strength of the price with momentum or volume. When conflicting signals appear, that’s when the price is at risk.

Using these indicators well requires practice. I recommend trying them on a demo account to understand how RSI, MACD, and OBV respond to price movements, and when Divergence appears. This will prepare you for real trading. Most importantly, a good forex reversal signal comes from combining multiple signals, not just a single indicator.