3 indicators that professional traders use to confirm entry points

Why Use Indicators to Identify Entry Points

Finding the right entry point for investments is a skill that every trader must develop. If you enter at the right moment, profits will follow. However, relying solely on news or fundamental analysis may cause you to miss the best entry points. Professional traders often use indicators to identify entry points for calculation and analysis to achieve more accurate entries, especially by using Divergence (as a signal of conflict), which helps reveal discrepancies between price and market (Momentum).

Basic Knowledge About Volume Oscillator (OBV)

Before discussing RSI and MACD, let’s understand OBV deeply, as it is often overlooked. OBV combines trading volume (Volume) and the color of candlesticks (green = buy, red = sell) to calculate and show the buying or selling pressure accumulated.

How to read OBV:

• OBV rising = accumulation of buying (more buying volume than selling)
• OBV decreasing = accumulation of selling (more selling volume than buying)

The key point is to observe OBV Divergence — when the price makes higher highs but OBV decreases (or vice versa), which is a warning sign called Bearish Divergence in an uptrend.

###Bearish Divergence in OBV

When the price continually makes new highs but OBV trends downward, it indicates that although the price is rising, the actual number of buyers is decreasing. This is a warning that the upward movement may not be sustainable.

###Bullish Divergence in OBV

When the price makes new lows continuously but OBV rises, it shows accumulation of buying pressure. Fewer sellers are present, indicating that the decline may be weak and a recovery could be near.

RSI Divergence: Basic Interpretation and Practical Use

RSI (Relative Strength Index) is an indicator that shows values between 0 and 100. It is mainly used to identify overbought (Overbought) conditions at 70 or above, or oversold (Oversold) conditions at 30 or below.

However, if the market trend is strong, RSI may remain overbought for a prolonged period, and prices can continue rising. Selling in overbought zones might lead to losses.

###Proper Use of RSI Divergence

For losses in an uptrend (Bearish Divergence):

1. First, observe the initial high where RSI exceeds 70 while the price makes a new high — do not sell yet, as the trend may still be strong.

2. Then, the price corrects (Correction) while RSI begins to decline from the overbought zone — continue to monitor, not a signal to enter.

3. Critical point: When the price makes a new high but RSI, which accompanies this rise, is lower than the previous high, this is RSI Bearish Divergence — the price is rising but momentum is weakening. This suggests the upward move is unstable, and selling should be considered.

4. When RSI drops below 70 again, it signals a faster and relatively safer entry point for selling.

For recovery in a downtrend (Bullish Divergence):

1. First, RSI drops below 30 along with the price making a new low — do not buy yet, as the trend may still have strength.

2. The price begins to rebound (Rebound) while RSI starts to rise from the oversold zone — continue to monitor, not an entry signal yet.

3. Critical point: When the price makes a new low but RSI, which accompanies this decline, is higher than the previous low, this is RSI Bullish Divergence — the price is falling but momentum is weakening. This indicates the decline is weak, and buying should be considered.

4. When RSI rises above 30 again, it signals a quick and relatively safe entry point for buying.

MACD Divergence: A Fast-Detecting Indicator

MACD (Moving Average Convergence Divergence) is an important indicator because it can signal both trend and momentum.

Basic MACD usage:

• MACD crossing above zero line = trend shifts from downtrend to uptrend
• MACD crossing below zero line = trend shifts from uptrend to downtrend
• Histogram increasing = trend momentum strengthening
• Histogram decreasing = trend momentum weakening

###Using MACD Divergence to Detect Reversals

Bearish Divergence in an Uptrend:

1. Price makes a new high, while the Histogram (the difference between MACD and Signal Line) also rises but with uncertain pattern.

2. Price corrects downward and then makes a new high.

3. Critical point: Histogram rises again but to a lower high than before, while the price is higher — this is MACD Bearish Divergence.

4. When the Histogram starts decreasing from the high, it signals a potential sell.

Bullish Divergence in a Downtrend:

1. Price makes a new low, and Histogram is strongly negative (steep negative values).

2. Price rebounds and then makes a new low.

3. Critical point: Histogram turns negative but to a less extreme value than before, while the price is lower — this is MACD Bullish Divergence.

4. When Histogram begins to rise from the low, it signals a potential buy.

Combining the 3 Indicators for Entry Points

Maximum effectiveness is achieved by using RSI, MACD, and OBV together:

• If all three show Divergence in the same direction, the signal is highly reliable.
• If indicators conflict, wait or reduce the trade size.

Practical Tips

1. Not a confirmation signal — Divergence is only a warning; wait for confirmation (e.g., price breaking Support/Resistance).

2. Best in strong trends — These indicators work well when the market trend is clear, not in sideways markets.

3. Use with risk management — Even with good signals, always set Stop Loss to manage risk.

4. Multiple confirmations — Check signals across different timeframes, e.g., H4 and D1. If signals align, the probability is higher.

By deeply understanding RSI Divergence, MACD Divergence, and OBV Divergence, and correctly applying indicator-based entry signals, traders will have powerful tools to find precise entry points and reduce risks more effectively.