Generally indicators are defined as look for a buy signal in OVERSOLD zone and look for a sell signal in OVERBOUGHT zone but it is not as simple as that cos nearly 65% of the trade done only on this condition fail and endup in hitting stoploss......So how should the OVERBOUGHT and OVERSOLD conditions should be understood.
What I observed is that stock gets more bullish and aggressive when the indicator (lets suppose RSI) enters into OVERBOUGHT lever (in this case 70 level) and becomes bearish when it enters into OVERSOLD level (in this case 30).............this is where a normal retail trader makes mistake actually looking for a reversal signal when the trend is strong......Simple point NEVER SELL WHEN INDICATOR IS RISING AND NEVER BUY WHEN INDICATOR IS FALLING.
This is just one of the many points that a technical trader should know.........
Experts please share your knowledge about actually understanding the Overbought and Oversold zones.Your knowledge could help many beginners and many such traders who have been making loose despite knowing the technicals.
What I observed is that stock gets more bullish and aggressive when the indicator (lets suppose RSI) enters into OVERBOUGHT lever (in this case 70 level) and becomes bearish when it enters into OVERSOLD level (in this case 30).............this is where a normal retail trader makes mistake actually looking for a reversal signal when the trend is strong......Simple point NEVER SELL WHEN INDICATOR IS RISING AND NEVER BUY WHEN INDICATOR IS FALLING.
This is just one of the many points that a technical trader should know.........
Experts please share your knowledge about actually understanding the Overbought and Oversold zones.Your knowledge could help many beginners and many such traders who have been making loose despite knowing the technicals.