Overbought/Oversold and how to trade off it

Where do you find your overbought/oversold and how do you trade it ?
Is it better to trade the continuation as in "When something is overbought it will remain overbought for some time, due to the forces which drove it into overbought initially don`t fade away fast enough so its still possible to jump on the train" or the reversal as in "the forces must be depleted by the time they drove something in to an overbought, therefore something must start falling soon" ?

OB/OS is defined relative to the oscillator that measures it. For example, it's generally accepted that the RSI and Stochastics indicator are OB/OS at the values above/below 80/20 respectively. I use the MACD, and see it when the histogram bars begin to change slope.

As you've mentioned, trading OB/OS signals can be quite tricky. The trick being whether an entry is at a peak/trough or a continuation of the previous move. Because trading (manual) is partly an art, you have to consider the context of where these signals print. What is the overall market structure? Is price in the way on continuing the move? Will it stall, then thrust through? Trading in a probabilistic endeavor. Every OB/OS signal won't be a reversal. However, OB/OS signals in their respective contexts, will most likely do what they've done in the past.

In summary:

try this