Best Overbought/Oversold indicator? | Forex Factory

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Best Overbought/Oversold indicator?

  • #1
  • First Post: Jan 15, 2016 6:50am Jan 15, 2016 6:50am
Hi There,

Can anyone suggest me the best overbought and oversold indicator with their settings? I am working on it and trying to figure out the overbought/oversold area to maximize probability of the trade...

appreciate your effort and help

thanks
  • #2
  • Jan 15, 2016 10:29am Jan 15, 2016 10:29am
I use stochastic, but don't rely on it 100% because it's lagging after all. Just a guideline
  • #3
  • Jan 15, 2016 3:14pm Jan 15, 2016 3:14pm
ForexMTN - it's really good if you know how to use it
Trade or not to trade - that is the question...
  • #4
  • Jan 15, 2016 5:42pm Jan 15, 2016 5:42pm
there is only two in your life time
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  • #5
  • Jan 15, 2016 5:48pm Jan 15, 2016 5:48pm
Quoting freakout
ForexMTN - it's really good if you know how to use it
can you help me to learn how to use it?

and also if you can point me the place to download it...

thanks
  • #6
  • Jan 15, 2016 5:48pm Jan 15, 2016 5:48pm
Quoting vasily
there is only two in your life time {image}
good one...was it a joke or serious?
  • #7
  • Jan 15, 2016 6:02pm Jan 15, 2016 6:02pm
Quoting shg
{quote} good one...was it a joke or serious?
do you see smile in my post
  • #8
  • Jan 15, 2016 6:15pm Jan 15, 2016 6:15pm
Quoting vasily
{quote} do you see smile in my post
I do not mean to be rude but you have marked to places which are like low and top but how will you define those places in live graph...once its past we can see that okay these were the best entries but in live we dont know where the price will stop...
  • #9
  • Jan 16, 2016 10:27am Jan 16, 2016 10:27am
Quoting shg
{quote} I do not mean to be rude but you have marked to places which are like low and top but how will you define those places in live graph...once its past we can see that okay these were the best entries but in live we dont know where the price will stop...
one should understand that, there is no overbought and oversold and high and low or dip.when you understand and accept that then you can trade.ıam not expecting you to understand it with my single post but market surly will teach you and make strongly understand what ı mean after some years and you to staying with some blown demo/live accounts.that day remember this russian guy, goto curch and light a candle for me.
  • #10
  • Jan 16, 2016 10:58am Jan 16, 2016 10:58am
eyes.

fibonacci.


correlation indicators. try >>>> http://www.forexfactory.com/showthre...36#post3934336 just play follow the leader

vsa.
  • #11
  • Edited 12:01pm Jan 16, 2016 11:07am | Edited 12:01pm
If you're only looking in overbought/oversold condition to initiate trade, you should only trade in range bound market conditions. In trending conditions indicator can stay in overbought/oversold terittory over extended period of time. Just look at USD/CAD, you would made huge loses in counter trend trading.

I personally use fibonacci retracements and extensions in combination with relative strenght index RSI (14).


Relative Strength Index RSI(14)

When RSI tags 70 or higher (overbought) you have confirmed existence of uptrend (impulse wave(s)).

IF then RSI in correction holds above 40 and turns up, you have possible confirmation of the end of corrective wave(s) (ABC type of correction is my favorite but be careful, you could also have ABCD or only one corrective wave in strong trends).

When RSI tags 30 or lower you have confirmed existence of downtrend (impulse wave(s)).
IF then RSI in correction holds below 60 and turns down, you have possible confirmation of the end of corrective wave(s).

When indicator constantly moves between 40 and 60 you are in ranging market.

Also pay attention to divergences between PA and RSI when RSI is in oversold (30) or overbought (70) territory. You could be looking at meaningful correction or ever reversal of PA.

Fibonacci retracements and extensions

After you have confirmed trend (70 - uptrend, 30 - downtrend) and price action (PA) has established price bottom, you apply Fibonacci retracement levels. Then you wait for PA to retrace to 38.2 %, 50 %, 61.8 % or 78.6 % and enter a trade (50 and 61.8 % are my favorite levels of retracements. I only take a trade at 38.2 % retracement if trend is VERY strong). Set stop loss above 78.6 % or 100 % retracement level.

Identifying which retracement level if any will hold is the most tricky part of Fibonacci trading. When you see trend line, support/resistance, 50, 100 or 200 simple moving average in proximity of Fibonacci level, there is good chance that level will hold (I usually wait for short consolidation around Fibonacci level or some candlestick reversal pattern at Fibonacci level before I take a trade).


After establishing legit entry point you have to establish possible take profit point(s), here Fibonacci extensions come into play:

If PA reverses at 38.2 % retracement there is good chance price will reach 138.2 % extension.
If PA reverses at 50 % or 61.8 % retracement there is good chance price will reach 161.8 % extension.
If PA reverses at 78.6 % retracement there is good chance price will test price bottom again or reach 118.1 % extension.

Fibonacci extensions are only general guides where PA could consolidate or reverse. You have to pay attention to resistance/support levels, 50, 100, 200 simple moving averages and existing price patterns on the way.
  • #12
  • Jan 16, 2016 11:18am Jan 16, 2016 11:18am
Sorry but can you define best?

And probability of what trade?
Build good relationships with others.
  • #13
  • Jan 16, 2016 11:20am Jan 16, 2016 11:20am
Hi,

We can't say all indicators or methods work all time,just chose which one convenience you..

A good idea was, trying to draw support and resistance line, both works well and give a good result..

Adhav
  • #14
  • Jan 16, 2016 11:53am Jan 16, 2016 11:53am
Quoting vasily
there is only two in your life time {image}
Russian men is right, because on right side of screen we dont see oversold or overbought. This is our expectations, in what direction we think that market will go. No Holly Grail in market, only probabilities. And some indicators can show some probabilities and then trader decide - it is worth to take a risk or no.
  • #15
  • Jan 16, 2016 1:34pm Jan 16, 2016 1:34pm
Quoting todamoon
{quote} Russian men is right, because on right side of screen we dont see oversold or overbought. This is our expectations, in what direction we think that market will go. No Holly Grail in market, only probabilities. And some indicators can show some probabilities and then trader decide - it is worth to take a risk or no.

russian men always right
  • #16
  • Jan 16, 2016 1:49pm Jan 16, 2016 1:49pm
For me, the only oscillator I use is the stochastic! I've found the 80/20 values to be excellent for determining if the market is oversold/overbought. This method works much better in the longer timeframes, as ones such as the M15-M1 are far too "noisy".
  • #17
  • Jan 16, 2016 6:03pm Jan 16, 2016 6:03pm
There is no such thing as being overbought or oversold. Save yourself the trouble now of chasing something that can't be caught. There are far more pressing things to take into account, such as trend breaks, SR breaks, and severe candle patterns. Price will go where it will go, regardless of what any bullshit indicator indicates.
There's always money in the banana stand.
  • #18
  • Jan 27, 2016 1:47am Jan 27, 2016 1:47am
When looking to generate signals from overbought and oversold conditions, I most times use the stochastic and look for when the %k stochastic crosses the 80 and the 20 regions. As I can not be over reliant on just the stochastic,I sometimes combine it with the Relative Strength Index to generate more accurate signals.
  • #19
  • Feb 10, 2016 4:12pm Feb 10, 2016 4:12pm
Quoting vasily
{quote} one should understand that, there is no overbought and oversold and high and low or dip.when you understand and accept that then you can trade.ıam not expecting you to understand it with my single post but market surly will teach you and make strongly understand what ı mean after some years and you to staying with some blown demo/live accounts.that day remember this russian guy, goto curch and light a candle for me.
I would want to say that identifying overbought and oversold can be an important part of establishing viable trade entries. So like have suggested here, it's imperative to get a indicator for this purpose.
Two of the most common indicators of overbought or oversold conditions are the relative strength index (RSI) and the stochastic indicators. Each measurement has its strengths and weaknesses but, like most indicators, they are strongest when used properly
For example when the When the RSI of a given security approaches 100, it is an indicator that the average gains increasingly exceed the average losses over the established time frame.
  • #20
  • Feb 10, 2016 5:11pm Feb 10, 2016 5:11pm
In my opinion, you need to graduate from your search for overbought/oversold identification and instead look for apexes. Any oscillating indicator capable of tracking the entire range of movement of price can easily be converted into an apex finder with a moving average or Bollinger band. Specifically looking for something that shows overbought/oversold is not a trading signal, since it can carry itself for several candles. You need something that can signal the high/low, such as a crossover on a change of direction, and that normally occurs with a measured decrease in momentum.

You actually want it to be lagging so it can proceed past the apex before it signals, as well as limit head fakes, so an oscillator with a "slowing" factor is best. Good Luck
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