Stochastic, MACD, Bollinger Bands Plus Day And Swing Traders
Learn How To Day And Swing Trade Using Stochastic, MACD, Bollinger Bands Like A Pro
Many times, I agonised over the fact that other traders were wasting my precious time by misusing the overbought and oversold trade signals. It is quite annoying especially if one is day trading. May be one should have a license to trade overbought and oversold. Shouldn't one? Alright, maybe not today.
My intention by writing this article is to help technical traders master the overbought and oversold momentum oscillators trading like a pro.
Oversold As Support
A technical indicator that is oversold is pointing to a support level. In other words, the indicator is saying that this is a support key level.
Overbought As Resistance
Contrary to the oversold, the overbought is highlighting a resistance.
Signal Line And Oversold Plus Overbought
Technical Traders often apply the moving average nine to MACD or RSI indicator to determine whether the indicator is Oversold or Overbought. For example the standard MACD is Oversold when it crosses above its signal line. In contrast, it is Overbought as it falls beneath the signal line. The same is true for the RSI indicator if one uses it in conjunction with its signal line.
The best approach to detect the Oversold or Overbought is to use a trend line instead of the signal line. For example MACD is breaking above its common sense Trend Line is equivalent to MACD Oversold. MACD breaks below its common sense Trend Line is equal to MACD Overbought. The same is true for RSI and CCI indicators. Use trend lines instead of MA nine as signal line.