Understanding Oversold and Overbought Stock call and making use of it.
Recently we are recommending technical call in stocks for short term with tags of oversold stocks and overbought stocks.
I would like to explain in brief about it to ensure you understand it before you place a call.
Overbought stock is a stock that is continuously rallying in past few sessions having high value in the technical oscillators like RSI and CCI. Even MACD is likely to be higher.
Traders tend to continuously buy even the overbought stocks as they keep making new highs everyday. They have a dynamic stoploss in such stocks to ensure they capture entire upmove in the stock.
Stoplosses are kept at certain supports and also on moving average crossovers.
What we do is to identify such stocks and also their stoploss where traders are more likely to exit long positions on such stocks.
For a Overbought stock, the recent highs are our Stoploss and Sell recommendation is given below Support levels or on moving average crossovers.
Some instances we recommend a sell below a support stock price which we consider the stock will reverse, if such support is not broken, we see traders buying the stock and ensure the stock hits fresh highs.
It is very important to wait and sell below such support.
Inversely, oversold stocks bounce on deep cut in recent sessions and kindly buy only above recommended price if any. Adhere to have a strict Stoploss mentioned.
The method has a risk to reward ratio close to 1:1 and a success ratio more than 70%.
Kindly workout your maths and risk management to last more than 100 trades with your capital.
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