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gandhiadg

Overbought Or Bulls Getting Stonger.

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Frm:gandhiadg;

 

 

As A Beginner To Technical Analysis I Would Like To Request A Clear Understanding And Insight From The Experienced Traders

On The

The Interpretations Related To Oscillatior Position For Short Term Trading Purposes.

 

For Example When Rsi Is In Overbought Zone And The Reading Increasing From 60 To 75 To 81 And So On.

Now Is It An Overbought Position For The Market To Reverse Or Bulls Are Getting Stonger. Similarly For Oversold Position When The Reading Drops Below 30 And Continues To Do, Is The Market Preparing To Reverse Or The Bears Are Getting Stronger.

 

What Could Be The Practical Guideline To Decipher Between The Two With A Good Level Of Probabilitly To Enable Taking Better Trading Decision

 

Thks In Advance.

 

Gandhiadg.

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Frm:gandhiadg;

 

 

As A Beginner To Technical Analysis I Would Like To Request A Clear Understanding And Insight From The Experienced Traders

On The

The Interpretations Related To Oscillatior Position For Short Term Trading Purposes.

 

For Example When Rsi Is In Overbought Zone And The Reading Increasing From 60 To 75 To 81 And So On.

Now Is It An Overbought Position For The Market To Reverse Or Bulls Are Getting Stonger. Similarly For Oversold Position When The Reading Drops Below 30 And Continues To Do, Is The Market Preparing To Reverse Or The Bears Are Getting Stronger.

 

What Could Be The Practical Guideline To Decipher Between The Two With A Good Level Of Probabilitly To Enable Taking Better Trading Decision

 

Thks In Advance.

 

Gandhiadg.

 

 

Well Gandhiadg,

 

those are some good questions but they could certainly end up with some subjective answers. Let's try to clear it up a bit...When you say short term trading are you referring to a swing approach? And secondly there are about 20 different answers to those questions depending on the type of chart you were to look at ( ex. price trending, rangebound, and daily, weekly, intraday etc etc)

 

If you could be just a little more specific I could probably offer you more help :cool:

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Gandhiadg, forget all that textbook crap about oscillators being overbought and oversold. Thats the first thing every new trader learns and the last trading method you want to be applying. Now the RSI can be used to spot divergences for short term trading. The MACD can be used as an overbought/oversold indicator for a longer timeframe such as weekly and monthly.

 

Price moves due to an imbalance in demand vs supply. If there is more demand, price will lift until there is a balance between bulls and bears. It will then move sideways and chop around. If there is more supply, price will decline until it reaches an area of balance. Imbalance vs balance. Trading off oscillators for overbought/oversold signals is a newbie tactic and a 100% sure way to lose.

 

Understand why price moves and why the market you are watching reverses at certain points. If you are able to understand market concept and what levels the professional traders are watching, you will be 90% ahead of the crowd. Good luck.

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Thks for the replies.

 

As for the details sought by Mr.Paul, i would say that i would be referring to a swing chart on daily basis (end of the day chart) with a swing parameter set at 3% . i would be looking to complete my roundtrip for buy and sell typicall within 3/5 days and would look to a value addition of about 5% for the transaction. The chart could be trending or range bound.

 

which indicators to go by when planning for a such a trade plan as going by the oscillator levels have more often trapped me in an incorrect trade.

 

expert guidance requested.

 

thks in advance.

 

gandhiadg.

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There is no such thing as overbought or oversold.

 

The sole purpose of the market is to find that place where there is a disagreement on value and an agreement on price. The market brings together sellers and buyers and at all prices where a trade is made there is a buyer for every seller. (We will hold off on issue of large block sellers right now-however even in this situation each single component of a large block is matched with a single component on the other side). Therefore there can't be more buyers than sellers or vise versa. Which is to say the market can't be overbought or oversold.

 

It is very important to remember the your oscillators do not lead price. Price does not turn because some line is over or under 80/20. Learn to follow price action at various important levels like Value Area Pivot High or Low, or even floor pivots. Follow how prices acts and reacts at these levels. Watch volume at these levels. Learn to track Professional Money. Leave the indicators to the 'herd'-don't be one of the 'herd'.

 

PRICE, VOLUME, ORDER FLOWthese are where the truth lies. And the truth is: markets move (turn) on imbalances of supply and demand.

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Thank You PivotProfiler and all for your valuable replies in terms of guidance.

 

Now, how does a begginer encompass all these valuable ideas into an actionable plan? Results could only follow then.

 

Thanks in advance.

 

gandhiadg

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