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Anonymous

12 Dec 2020

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Stocks

How do you tell if a stock is overbought or underbought?

Apart from using the RSI indicator which we are all familiar with, how else do you tell if a stock is overbought or underbought?

Discussion (4)

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After some point you can tell by looking at the price actions, but if you are unsure, there are many oscillator indicators, rightfully mentioned, RSI is one.

I also use Bollinger bands, StochasticsFull, MACD and Williams%R. There are other indicators I look at but these are for oscillators (overbought/sold)

These do not in itself give you buy signals, they can only add to your probability. The more indicators giving a signal, the higher the probability. How this works is that many traders are looking at different unique sets of indicators. Anytime a specific indicator/stratergy gives a buy signal for example, it means there are a group of people who are looking to buy. Similarly the same thing happens for another indicator.

When you have multiple indicators (beyond just oscillators), be it oscillators, momentum indicators, candlesticks, support & resistance etc... you have multiple groups of traders adding to huge buying momentum.

None of these give any certainty, please have due diligence and have proper position sizing and risk management. Make sure the math works out for your stratergy. Even though there is no certainty, proper management allows you to profit consistently even if you are right only 30% of the time. That's trading.

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The indicators i normally use.

  • bollinger band

  • moving average 20, 50, 150

  • MACD

  • william %R

  • force index

  • support / resistence

  • candlestick

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