3 Indicators that Help You Spot Reversal Points and Find Additional Profit Opportunities

Identifying reversal points in the crypto market is considered a trader’s dream because this zone offers the best prices in the movement cycle. Whether it’s an uptrend reversal point where traders have the opportunity to sell at the highest price, or a downtrend reversal point where they can buy at the lowest price.

However, estimating reversal points solely by analyzing data, tracking news, or visually inspecting numbers can be risky. For this reason, professional traders often rely on indicators to identify reversal points to help estimate the general trend framework, making trading systems more accurate and reliable.

Principles for Choosing Indicators That Help Identify Reversal Points

Indicators that signal reversals are mostly Momentum indicators that help identify Overbought (excessive buying) and Oversold (excessive selling) zones, allowing us to clearly see the price movement forces.

However, using these indicators directly often encounters inaccuracies, especially when the market is in a strong trend causing Overbought or Oversold conditions to occur repeatedly. The key is to use indicators correctly, and skilled traders often employ Divergence (conflict) techniques to find safer reversal points.

3 Popular Indicators for Finding Reversal Points

1. RSI Divergence - Strength Indicator

RSI (Relative Strength Index) is a Momentum indicator with values between 0-100. Traders are familiar with the basic reading methods:

• RSI > 70: Indicates the price is in Overbought (uptrend overextended) and shows bullish (Bullish) signals - a zone to consider selling.
• RSI < 30: Indicates the price is in Oversold (downtrend overextended) and shows bearish (Bearish) signals - a zone to consider buying.

However, this method is accurate only in sideways markets. When the market is in a strong trend, RSI will continuously show Overbought/Oversold conditions, making selling in Overbought zones or buying in Oversold zones not true reversal points.

Safer method: Use RSI Divergence

★ Bearish Divergence (indicates a downtrend in an uptrend) ★

• When RSI rises above 70 along with a new high in price, it indicates an Overbought condition. In a strong uptrend, this can happen repeatedly, so selling at this point is not recommended.
• After the first peak, the price begins to correct while RSI drops below 70, showing weakening bullish momentum but not confirming a reversal.
• Reversal signal: Price continues to rise to new highs, but RSI that is rising shows lower highs than the first peak — this is genuine RSI Divergence, indicating the current rally is unstable and at risk of turning down.

★ Bullish Divergence (indicates an uptrend in a downtrend) ★

• When RSI is below 30 with a new low, it indicates an Oversold condition. In a strong downtrend, this can happen repeatedly, so buying at this point is not advised.
• After the first bottom, the price begins to rebound while RSI rises above 30, showing weakening bearish momentum but not confirming a reversal.
• Reversal signal: Price continues to decline to new lows, but RSI that is falling shows higher lows than the first bottom — this is RSI Bullish Divergence, indicating the current decline is unstable and at risk of reversing upward.

2. MACD Divergence - Trend and Momentum Indicator

MACD (Moving Average Convergence Divergence) is popular because it can be used to analyze both trend and momentum.

Trend indication:

• MACD above zero line: price is starting an uptrend.
• MACD below zero line: price is starting a downtrend.

Momentum indication: Look at the Histogram (the difference between MACD and Signal Line):

• Positive Histogram: upward momentum, the higher the value, the stronger the trend.
• Negative Histogram: downward momentum, the more negative, the stronger the trend.

However, observing momentum weakening alone is not enough to identify reversals. We need to use MACD Divergence techniques.

★ Bearish Divergence (indicates a downtrend in an uptrend) ★

• When the price makes higher highs but the Histogram (positive values) decrease, it indicates weakening bullish momentum but does not confirm a reversal.
• After a correction, if the price rebounds to a new high while the Histogram increases but remains below the previous high, this is MACD Bearish Divergence, suggesting the current rally is unstable and likely to turn down.

★ Bullish Divergence (indicates an uptrend in a downtrend) ★

• When the price makes lower lows but the Histogram (negative values) start increasing (becoming less negative), it indicates weakening bearish momentum but not yet confirming a reversal.
• When the price rebounds and makes a new low while the Histogram decreases but is less negative than before, this is MACD Bullish Divergence, suggesting the current decline is unstable and may reverse upward.

( 3. OBV Divergence - Volume Indicator

Besides Momentum indicators, Volume indicators are also useful for confirming reversal points. OBV )On-Balance Volume### is calculated from the volume and the direction of candles (green or red) to measure buy/sell ratios.

• Rising OBV (graph rising): assets are accumulating buy volume.
• Falling OBV (graph falling): assets are being gradually sold.

OBV Divergence can also be used to identify reversals.

(# ★ Bearish Divergence )indicates a downtrend in an uptrend( ★

Observe the price making higher highs while OBV signals conflict: it tends to decline, meaning while the price rises, the selling volume is increasing. This is Bearish Divergence and is unstable, with a high chance of turning into a downtrend reversal.

)# ★ Bullish Divergence (indicates an uptrend in a downtrend) ★

Observe the price making lower lows while OBV signals conflict: it tends to increase, meaning while the price declines, buying volume is increasing. This is Bullish Divergence and is unstable, with a high chance of reversing upward.

Summary: Divergence Techniques Improve Accuracy

Now we know 3 indicators that help identify reversal points—RSI, MACD, and OBV—by observing Divergence rather than relying solely on raw values.

This small technique may seem complex, but it is highly effective and can be applied to other momentum or volume indicators you are familiar with. By noticing conflicting signals between price and momentum/volume, you can better identify entry points.

When applying these techniques in real trading, you will find that spotting reversal points is no longer just a matter of luck but a truly useful tool to increase your profit opportunities.