We reveal the secrets of these indicators for traders of all levels - from beginners to professionals. Here is the key to understanding them.

Overbought and oversold indicators are widely used in technical analysis to identify potential entry points into the market. Their concept is based on the assumption that when the price of an asset reaches extreme values, there is a high likelihood of a trend reversal.

The oversold signal is formed when the asset's price drops to a level that is considered unjustifiably low. This situation can arise under strong selling pressure or against the backdrop of negative news about the company. To identify the oversold condition, traders often turn to technical tools such as the Relative Strength Index (RSI) or the stochastic oscillator. These indicators signal oversold conditions when their values fall below certain levels - typically 30 for RSI and 20 for stochastic.

The opposite situation — an overbought signal — occurs when the price of an asset rises to a level that exceeds its fair value. This can be the result of active buying or positive news about the company. RSI and the stochastic oscillator are also used to identify overbought conditions. In this case, the indicators show overbought conditions when reaching the upper limits — typically above 70 for RSI and 80 for the stochastic.

It is important to consider that overbought and oversold signals are not absolutely reliable and should be used in conjunction with other technical analysis methods to confirm trading hypotheses. Moreover, it is critically important to take into account fundamental factors such as the company's financial performance and market news before making trading decisions. For example, the current uncertainty surrounding the actions of the SEC is putting significant pressure on the market as a whole.