Hey folks, been refining a strategy lately that's been surprisingly effective for catching those tricky altcoin reversals. It’s pretty straightforward and focuses on combining the On-Balance Volume (OBV) indicator with price action.
The core idea is to look for bullish divergence on OBV while the price is making new lows. What this means is that the price is dropping and making lower lows, but the OBV is starting to make higher lows. This divergence suggests that selling pressure is weakening, even though the price action might still look bearish.
Here’s a quick rundown of the steps I follow:
- Identify an altcoin that has been in a significant downtrend.
- Look for price making lower lows, but OBV making higher lows (bullish divergence). This is the primary signal.
- Wait for a confirmation candle. I typically look for a strong bullish candle (like a hammer or engulfing candle) closing above a short-term resistance level or a previous candle's high.
- Entry: I usually enter on the close of the confirmation candle or slightly above it.
- Stop-loss: I place my stop-loss just below the recent low that formed before the confirmation candle.
- Target: This is more discretionary, but I often aim for at least a 2R (risk/reward) or look for significant resistance levels on the chart.
I find this works best on lower timeframes (like 1H or 4H) for swing trading, but I’ve also seen it play out on daily charts for longer-term holds. It’s not foolproof, of course, and no strategy is. Always manage your risk!
Has anyone else had success using OBV divergence for identifying reversal points? Would love to hear your experiences or any tweaks you make to this approach!