One of the ways that traders can identify signs of a trend reversal is by using technical indicators. And here are 3 types of indicators that can do this role well.

Moving Average Indicator

To determine a reliable reversal point, traders should use at least 2 moving averages or more. As shown below

In the image above we have 3 moving averages: MA 100 (blue), MA 35 (green), MA 15 (red). In which, the 100 MA represents the overall trend. And the reversal signals are defined as follows
  • If the candle closes below all 3 moving averages and the fastest MA (MA 15) is below the 2 slower MA lines (MA 100 and 35), it is a bearish reversal signal. We look at the left side of the chart above.
  • Similarly, if the candle closes above all 3 moving averages and the fastest MA is above the 2 slower moving averages (MA 100 and 35), it is a bullish reversal signal. You see the right side of the chart above.
However, the problem is that, in a sideways market, the reverse signal will no longer be accurate. At the same time, the MA also provides few reversal signals, so the opportunity to make money is also less.

MACD indicator

In fact, the MACD is more powerful in determining trend strength and cycles. As the chart below shows the MACD (5,100.5), when the green histogram and the red line cross the zero level it is a good reversal signal. (note that both lines cross the 0 levels, the signal is really reliable).

However, you should note that MACD also has its own disadvantages. MACD has lagging signals and is prone to false breakouts. However, if you know how to combine, the reversal signal from MACD is a very reliable confirmation signal.

Stochastic indicator

The third indicator is the Stochastic indicator. Stoch is quite good at helping traders identify the beginning as well as the end of a trend. That means it also provides reliable reversal signals.

As you can see in the picture below, the Stoch indicator (250, 3, 3) has shown quite accurate reversal signals:
The advantage of this indicator is that it is sensitive to price changes. Therefore, the reversal signal provided by Stoch will be more timely.

Above are 3 technical indicators that can help you identify trend reversal points. However, we should not use these signals independently, as there will be many noisy signals. So you need more confirmation from the signal of such an indicator or other trading technique that will be more reliable.

Each indicator has its own advantages and disadvantages, so depending on the method and trading method of each trader, we choose the indicator accordingly.