Overbought and Oversold Forex Indicator is a unique type of oscillator indicator. The Forex market is a 24 hours market, and the assets’ volatility is not the same all the time.
Prices in the fx market move by creating patterns and the strength of the asset price varies along with the demand. This indicator can determine the edge level where the price may react or change the movement.
It is suitable for any currency pair of the forex market, stocks, or commodities and works fine at the time frames of 15M, 30M, 1H, and 4H charts.
The explanation of the indicator is straightforward: it identifies the areas where the movement is exhausted or the ending of the current trend. So traders can quickly enter the market for more accurate, well-timed, and highly profitable trades.
When there has been a consistent and significant upward price movement that occurs for a certain period without much pullback is called overbought level.
Therefore, a consistent and significant downward trend with much pullback is an oversold condition for a certain period. Asset prices can remain at these oversold and overbought areas for an extended period but have a greater chance of reversing.
The signal line of this indicator reaches above the 70 defines overbought, and it becomes red. Similarly, when it crosses below the 30, the asset price is at an oversold condition, and the signal line becomes green.
Sell orders are suggested when the signal line crosses below 70 and continues to move towards 30; close the order when the signal line becomes red (below 30).
Hence enter buy orders when the signal line crosses above the 30 levels and continue to move towards 70, close the order when the signal line becomes green (above 70).
Any order checks the higher time frame charts and matches the price direction is the same as the order direction. Checking the higher time frames charts is also recommended to eliminate the fake highs and lows.
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