Using overbought/oversold indicators
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Shantanu Marathe
Jan 19, 2010, 9:12:01 AM1/19/10
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One way of trading is using the indicators such as RSI, Stochasitcs etc.
When these indicators move between 70/80 - 100 markets are thought to be overbought.
When these indicators move between 30/20- 0 markets are thought to be oversold.
You can get some idea about the indicators here.
Not many books may tell you that the indicators are to be used only in the direction of the main trend.
e.g. In a daily uptrend, only take signals of RSI in the oversold region to buy and vice versa.
There are many more nuances to this but about that some other time!
When these indicators move between 70/80 - 100 markets are thought to be overbought.
When these indicators move between 30/20- 0 markets are thought to be oversold.
You can get some idea about the indicators here.
Not many books may tell you that the indicators are to be used only in the direction of the main trend.
e.g. In a daily uptrend, only take signals of RSI in the oversold region to buy and vice versa.
There are many more nuances to this but about that some other time!
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