Question: What technical indicator will tell you that a top or bottom is in place?
Answer: None….technical indicators cannot predict the future. They may show changing momentum, but that does not mean a top or a bottom is in place.
Question: What can you use to help you identify a potential top or a bottom in the market?
Answer: An economic calendar.
Why? It is the fundamentals of the market that determine the tops and the bottoms while the technicals show us how we get between those two points. Major tops and bottoms are typically a result of a changing interest rate environment and have nothing to do with the status of Stochastics, RSI, MACD etc.
This is one of the reasons that most professional traders use both fundamental and technical analysis in their trading approach. They follow any event that influences interest rates as they know that higher interest rates usually lead to a higher currency value while lower interest rates usually lead to a lower currency value. So they will check out an economic calendar at least once a week to be aware of what is being released during the week so they can be prepared. But you don’t have to be an economic expert to be successful at trading. You can let the analysts at DailyFX and DailyFX+ handle that for you. Each week you will see reports on what scheduled news events can cause volatility in the market. The DailyFX analysts will also offer an educated guess on how the market might react to that event. You can also go to the economic calendar at http://www.dailyfx.com/calendar/ to see what will be released yourself. Below is an example of what you will find on the calendar which lists only US releases. If you are not sure the significance of any of these events, follow the analysts at DailyFX and DailyFX+ and they can help you understand, which can lead to better trading results.