Which of the indicators are the best for identifying Overbought and Oversold, and what do these terms generally mean and how to make money with it? Read on and find out everything. Also download modified versions of indicators with Alerts for MT4!
Determining overbought and oversold zones can be an important part of a successful trading strategy, and this is exactly what all traders need. To accurately enter the market on trend reversals and maximize profits while remaining in the market for a long time. There are a number of indicators that will help you find these zones quickly and effortlessly, but you need to know how to use them correctly.
Fortunately, on our website you will find all the information you need about overbought and oversold indicators and everything else a trader may need. To achieve significant results, I recommend that you carefully read this article and who knows, maybe this is exactly what you are missing for successful Forex trading? ..
Next, we will consider such indicators, we will provide links to their detailed reviews. There you can also download overbought and oversold indicators for MT4. With Alerts and other cool features, all are equally popular and convenient, choose purely to your liking. In our TOP they are just in random order, not from Best to Worst.
So, TOP 3 Overbought and Oversold Indicator!
RSI (Relative Strength Index) is an index of relative strength, developed by Wallace Wilder and was described by the author in Futures magazine in 1978 and immediately gained worldwide fame among the trader. The essence of the work is that it compares the current “strength” of a trading instrument with previous indicators. Overbought and Oversold zones are located in the indicator window above and below, respectively, and are indicated by dashed lines. Everything is customizable, read the link above for details.
Stochastic (Stochastic Oscillator) – will show overbought and oversold zones and more. As you can see, it looks like RSI, but with its own peculiarities. Stochastic Author John Lane for 60 years successfully traded this indicator. He considered overbought and oversold conditions as one of the strongest signals, as well as convergence and divergence near overbought and oversold zones. 80 and 20… Be sure to read the detailed description of how this indicator works.
Many other, less popular overbought-oversold indicators use the same principles as the Stochastic, so after learning how to work with this indicator, you will automatically learn a dozen more. So don’t hesitate and start right now.
Bollinger Bands are outwardly different from the previous two, but the principle of operation is similar. Center line – average, normal prices. The upper one is the overbought zone, and the lower one is the oversold zone, respectively.
These are all very old indicators that have proven themselves for decades. Their authors became millionaires, or at least very wealthy people. In addition, they have all authored books on stock analysis, appeared on television, lectured and conducted seminars around the world.
Advantages and Disadvantages of Overbought and Oversold Indicators
- Everything is done automatically. Once upon a time, traders sat and calculated all these indicators themselves, using formulas on leaflets. And the graphs were also drawn by hand! And now you can even view charts online with all the necessary functions. That was the time … Today, fortunately, you have the opportunity to simply put an indicator on the chart that will do everything for you. Will not make a mistake in the calculations, it will save time and effort. Beauty!
- Ease of learning. It won’t take you long to learn how to deal with these overbought-oversold indicators. The articles on our site are written in a simple and understandable language, there are many videos in which everything is specifically explained as much as possible for everyone.
- Everything is customizable for each trader. Using the links that I have given above, you can download modified versions of the corresponding indicators and this will allow you to further customize all the parameters, up to color and other things as you like.
- Lack of subjectivity. You look at the graph a little differently each time, have you thought about it? Depending on your mood, fatigue, and the success of your trading, you react a little differently to what is happening each time. It really is interferes… Because the market doesn’t care about your mood or whether you feel good, it is ruthless and ruthless. But with the help of indicators, you can level these moments. After all, as I said, an indicator is just a formula, it has no feelings and emotions. She gives out dry calculations every time and thus processes quotes on the chart. And you already, regardless of your subjective judgments, see the result – overbought or oversold and you can make decisions about buying or selling an asset in a much more balanced way.
I would single out such a minus, it applies in general to all indicators, in this regard, for a deeper understanding, you can read the article What are indicators. No indicator is “The Holy Grail”… These are, in fact, just mathematical formulas, the calculation results of which are displayed on the screen in the form of lines, stripes, columns and anything else. This certainly makes it easier to read and makes the data visual, but it is not 100% a guarantee that every single signal will be profitable. This is how all financial markets work, there are no guarantees.
But millions Traders around the world use overbought and oversold indicators even though they know there are no guarantees. But forewarned is forearmed! Consider what you just learned and everything will be fine with you.
As I said, all these indicators are good in their own way and it is difficult to single out any one best indicator of overbought oversold conditions. So I recommend right now read the description of each and try it on a demo account. And there you should be guided by your feelings – what you like best. Which indicator is preferable for you, which signals are easier to perceive. It won’t take you much time to learn, but you can significantly improve your trading results if you master these simple tools, so get started, it’s useful!