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The Overbought Oversold (aka OB/OS) indicator shows when the market is overbought (and a correction is therefore on the horizon) and when it is oversold (and a rally is probably about to occur). An OB/OS above +200 is bearish, while if it is below -200 it's a bullish sign. Be warned that extremes of the indicator may not be followed by the a correction, but may presage a continuation in th ecurrent steep slope. Day trading systems using this indicator are more common than you might think ,although the fact that it is discretionary as to whether an extreme is actually overbought or not makes the OB/OS indicator of limited use except to experienced day traders. To calculate the Overbought Oversold indicator, take a 10-period EMA of the difference between the number of advancing and declining issues

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