❗️Trend Exhaustion Signals: Know When Momentum Fades
Understanding when a trend loses its steam gives traders a crucial edge. While trends may feel endless, each reaches a critical point where momentum fades, marking a potential exit, or a reversal opportunity. Here's how to spot these signs:
- RSI and MACD Divergence: Divergences show when price directions split from momentum indicators, signaling exhaustion—bullish for lower prices, bearish for higher ones.
- Volume Dry-Up: Trends run on volume; a decrease often indicates the fading interest or institutional profit-taking.
- Long-Wick Candles at Extremes: These suggest price rejection at market tops/bottoms, common with Shooting Star, Inverted Hammer, and Doji at key levels.
- Structure Break: Recognize Change of Character (CHoCH) and Break of Structure (BOS) as signals of shifts in trend continuity.
- Parabolic Price Action & Overextension: Rapid price accelerations often precede trend ends, indicating potential reversals.
Trading around exhaustion requires tightening stops, avoiding late entries, and being ready for reversal setups. Use multi-timeframe analysis for context—what seems like exhaustion on one chart could be a pullback on another. Anticipate market moves, prepare ahead, and stay savvy.
