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Do you want to know when to expect a trend reversal? Crowns are one way to spot a trend reversal. Another way is to spot divergance. You need an oscillator to help you spot divergence. You can use an indicator like MACD, RSI, Stochastic, or CCI. I will show you how to use MACD.
 
Add the MACD indicator to your chart. When you see the trend going one direction, and the macd going another you have divergence.
MACD Divergence

MACD Divergence

The candles are in a downtrend, but the MACD is making higher lows. This means there is divergance and there is a good chance the candles will be going bullish soon.

MACD Divergence

MACD Divergence

Voila, the candles have turned!

To summarize, we have divergence:

  • If the price is making lower lows,
    but the oscillator is making higher lows.
  • If the price is making higher highs,
    but the oscillator is making lower highs.
  • If the price is making higher lows,
    but the oscillator is making lower lows.
  • If the price is making lower highs,
    but the oscillator is making higher highs.

Do not use the divergence on time frames smaller than the 1 hour. The longer the line of divergance the stronger the indicator. The larger the time frame showing the divergence, the stronger the indicator.

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