How do I know when a chart is overbought/oversold after a big move the previous day?

Beginner Questions
1

Hi,

Yesterday I had a trade setup to short GBPUSD on the 30 minute chart, which was a good 3:1 winning trade. However, today I had another signal to short GBPUSD again on the same timeframe, but it didn’t work out and got stopped out. From my experience I usually know that after a big move in the previous day, it is less likely that we will have another big move the following day.

Can you please tell me what I should have done in this case? Should I have gone with my experience and not traded it today based on the fact that the probability of there being a another profitable continuation today was less likely? Or should I be have used some sort of indicator to keep me out of today’s trade? Or should I continue to trade as normal and take the loss? If you look at GBPUSD on the 30 minute chart, you can see it went down nicely yesterday and the price flattened out today and didn’t move. Normally you will not have another move like this the following day, but how can I keep myself out of this?

What would you have done?

Thanks for your help!!!

2

We win some we lose some :slight_smile:

I’m in the reverse trade - but who knows ? You may be right, I may be right, we may both be right, we may both be wrong !

You can’t win 'em all !

3

RSI for overbought/sold/divergences , and you can use ATR to see the strength of current trend. Use volume too

4

Go with your experience as long as you can quantify this.

Don’t add an indicator to your trading decision process unless you absolutely have to know what it tells you and you aren’t already getting this information from your chart.

Unless 90%+ confident of a set-up, enter by using an order set at a level where price confirms your trade signal.

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5

Some of us find the concepts of “overbought” and “oversold” more misleading than helpful, altogether.

That situation isn’t helped by the fact that different people (and authors and websites and “experts”) actually use the words with quite widely different meanings.

But I agree completely with what tommor says above.

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