What is overbought and oversold?
1. overbought means that the time and space for the market to rise after the market rises are relatively large, so pay attention to the risk of the market peaking;
2. Oversold means that the time and space for the market to fall after the market falls are relatively large, and it is necessary to pay attention to the probability of the market bottoming out;
Whether it is overbought or oversold, it is an active situation that reflects the hot market. Just like a saying, "When people gather firewood, the flames are high." Only when everyone is optimistic about a market will the market continue to hit new heights, and this time is also the time when the market is easy to form a high point. Therefore, by analyzing overbought and oversold, it is necessary to identify whether the market has the probability of bottoming out.
Judgment skills of overbought and oversold
When judging overbought and oversold, it can be judged by combining KDJ indicators. The j value of KDJ is mainly used here. It is recommended to look at the weekly or daily chart in the use cycle;
Judgment skills of overbought: When the price rises strongly and the J value reaches the maximum and crosses the value of 100, it means that the market has entered the overbought area. When the market enters the overbought area, it doesn't mean that it will fall and it can buy short orders, but the probability of the market peaking is very high, but whether it can form a top depends on whether the actual market can form a top shape, as shown in the following figure:
What is the secret of short-term trading overbought and oversold?
As shown in the above figure, the daily icon of Apple Futures has five red circles, all above 100. After that, Apple futures peaked to varying degrees, and it can be prevented from buying in the relative top area by identifying overbought.
Judging skills of oversold: oversold and overbought are the reverse market. When the J value of KDJ falls below 0 after the market falls, we need to pay attention to the probability of bottoming out when the market enters the oversold area. Of course, take the actual trend of the market as an example. If the market forms a bottom shape, we can easily buy more than one, as shown in the following figure:
What is the secret of short-term trading overbought and oversold?
As shown above, it is the weekly chart of thread futures. In the chart, three red circles are marked with * *. When the market falls below 0 after falling J, the K-line also forms the bottom structure, which means that the market has the probability of bottoming out.
Therefore, by analyzing overbought and oversold, we can not only prevent buying the relative top and bottom positions, but also better grasp the high and low positions of the market. Of course, the error rate of this method is relatively high in a short time, especially in the strong trend market. This kind of behavior will be more frequent. I suggest you refer to the daily chart or weekly chart.
Disclaimer: This article is an original article of Qinchuan Finance, and other misappropriation is invalid. At the same time, my article is only used for technical exchange, not for other purposes. At the same time, it also stated that it does not recommend stocks, does not manage wealth on behalf of customers, and does not introduce wealth management business. Only do technical exchanges; Pay attention to friends who like articles. Thank you.
What is the secret of short-term trading overbought and oversold?