All language subtitles for 12. Examples - How to Identify Overbought and Oversold Conditions

Hello and welcome back to cryptocurrency trading masterclass by a wealthy education in this video,

I'm going to show you how to identify several over Botten and over sold conditions.

So here's Bitcoin and we'll go ahead and we'll put the indicator Relative Strength Index or RSI.

On the chart, that'll be the first thing that will do, and you can see that we have gotten overboard

in this and had been for a while as we got parabolic and as we rolled over your signal to get out would

have been when we broke this low here.

You know, we bounced from here, and once you break down below there, that's our signal to get out

of your uptrend, right.

But being overboard by itself doesn't necessarily guarantee that anything happens.

Notice how we're in the overborne zone here.

The price is still drifting higher.

So it's not unfortunately, it's just not that simple.

You could have.

Put some moving averages.

And since this is a daily chart, I'll go ahead and put the 50 in the two hundred.

So there's your 50.

And this will be your two hundred.

So clearly, you do not want to be a seller this entire time, and why is that?

Well, prices above the two hundred day, Emma, that your longer term indicator doesn't necessarily

mean you want to be a buyer.

You just don't want to be a seller.

Now that we are clearly above there and we got ironically, we got in this overbuy condition, we pulled

back a little bit and once we were out of that overborne condition.

Then you can start to think about buying, especially as we drifted closer to the 50 day Emma.

So what would have made you think about that?

Well, the fact that we were breaking twenty thousand to large psychologically significant figure.

That would attract a certain amount of attention.

Plus, many, many, many moons ago, that was a high back there.

So now that we have broken above there, even though we're overbought, we're actually drifting lower

as far as that's concerned.

Let's go ahead and type in volume.

And as you get this breakout, the volume spike.

So that's good.

That's exactly what you want to see.

And much like price action, the price on a chart, you can see that.

Swing high, swing low, swing high, swing low, swing high, swing low, so that's when you want to

be out now again, doesn't necessarily mean you want to be a seller.

What it means is you don't want to be buying.

Right at this juncture.

We pulled back here.

To this 50 day M.A, which is supportive and we are not overbought or oversold, so it is somewhat interesting

volume spike, so it's time to think about going long again.

We go ahead and get rid of this and let me put in.

The Makdisi.

Big, massive spike in volume, negative cross on the market.

We are just now.

Starting to get that Bicego at a much more reasonable rate than being completely over, but up here,

getting it right here, just above the 50 day M.A, the volume spike was right before it, that all

kinds of kind of lines up quite nicely.

Go ahead and go to the 30 minute chart for those of you looking to day trade.

To the RSI.

You can see that we peaked a little bit here, kept peaking here notice, though.

This is that divergence that I had been talking about previously.

That was a sign that maybe we were going to find some trouble, but there should be support right in

this area.

So now we're kind of trying to figure that out.

Definitely worth paying attention to.

Now, do we have volume that tells us anything?

So.

Notice here a volume spike after an overbought condition that it tells you to watch.

But you started to get that divergence in volume.

Was it Spike, but not as much as last time, Spike?

Not as much as last time there as well.

So that that tells you that perhaps it's a scenario where not all things are as they appear.

Let's go ahead and take a look at the four hour chart.

Overbought condition, massive volume, is it going to run out of steam?

It does not necessarily a selling condition, but it is something to be aware of your already long bitcoin.

So as we slide over to a theory, I'm.

Let's do volume first.

Massive volume breakout.

That's exactly what you want to see.

Now, the question is.

Does it have enough momentum to continue going higher?

Well, it did pull back, so let's see what our RSI said.

And exactly right there we are overbought as we got here, we started to drop.

That shows you that you are running out of momentum, but once you get out of the overbought condition,

then it's possible for the market to think, OK, fine, we're not overbought anymore.

It might be safe to get back in one thousand dollars.

Nice.

Psychologically important.

No, they're.

You know, it just attracts a lot of headline attention, if you will.

Let's see where.

The 50 looks like here you can see the 50 is coming up to meet it, and that should be dynamic support.

Let's go ahead and take a look behind the previous times.

I would go ahead and put.

And now they're moving average.

And this time I want to make it two hundred.

There's a cross, their volume didn't spike up, but we weren't overbought either, so.

It was a safe trade to take in that sense, you didn't have to worry about, you know, are we overbought?

Is this going to hurt?

Let's go ahead and put them back, Deon.

And as you put them back, Deon, you can see that we crossed here right around the zero line and then

picked up again and we were walking right along the 50 day.

Emma had a quick run up and you started to see we were getting a little overboard.

And once you broke down below this low here, it was time to get out.

You did move, did lose the very last part of the move.

But it is better to be out of the trade a little too early than a little too late.

That's part of what indicators are supposed to do.

They're supposed to give you a little bit of a heads up.

Overbought condition breaks through the 50 day, Emma, you could very well suspect that we're going

to go looking towards that 200 day moving average, not Emma, but moving average ESMAY simple moving

average.

You can see that down here.

We started to get a little over souled shortly afterwards.

We got a bullish cross.

Volume was very quiet, so we kind of just drifted, then a volume peaked here.

And in overborne condition, and you can see that this was a lot of noise.

Well, here's here's a question.

Why was it noise?

Well, remember.

That when it comes to these moving averages and the oscillators, they tend to need some type of trend

and we just kind of lost steam there, we just kind of went sideways.

Market was just trying to figure itself out.

This is a trend, and you can see that's across we were slightly overbought, came back just a little

bit before we took off.

We weren't overbought.

And once we broke that 200 day M.A, a lot of longer term traders will look at that as a bullish sign.

So there's a lot going on at any time and any need to be aware of the fact that some things will contradict

other things.

And that's part of the challenge, that's why you don't want 12 different indicators on the chart you

want to be able to to.

Take a trade based upon.

What the market's telling you.

And a somewhat clear and concise manner, so, for example.

One here had been resistance, we broke above it on decent volume and we continue to go higher.

If you throw them back in their.

You can see that we broke out here, we broke above that zero line shortly thereafter, it did lag a

little bit.

That's not that uncommon.

Volume is immediate.

Most indicators are lags.

So you do have to keep in mind.

Notice how we went right up to the 50 day M.A and then pulled back before we broke through it again,

so this offers a little bit of dynamic resistance.

But when we pulled back, we had this cross in decent volume as we broke through again, once we broke

through or broke through, finally broke through.

Once we finally broke through, you could even go so far as to let me go ahead and change this to two

hundred.

But you can even as we broke through, you could say.

There's the two day, Emma, and this level here, right around 175, was resistant, so we had nice

volume going into it and a pick up in volume and the two hundred day, Emma, the previous resistance

is now a port offering support, 50 day Emma comes in here.

It's a nice buying opportunity based upon the candlestick pattern called a hammer that we'll talk about

later than 50 day.

Emma continues to go higher.

So really, at the end of the day, what you need to be aware of is.

No matter how perfect the setup is, sometimes they don't work, but if you have a handful of reasons

to be in a trade, more often than not you will make money.

And at the end of the day, making money is about psychology.

It's about trusting in your system.

So you need to test all of this out.

But it is also about risk management.

And that's the next video we'll talk about, because this is the part of trading.

That a lot of traders skimp on and they really pay the price, so next video, we're talking about risk

management strategies.