How to Identify Conditions Overbought / Oversold Genuine and Counterfeit

Buddy Trading Gold may often hear or read traders who say the price is currently overbought or oversold area; "Overbought" or "oversold". You probably already know that if the price was considered overbought (oversold) then there is a possibility he will move down. Conversely, if it is considered oversold (oversold) then there is a possibility of further movement will rise.

Trading Gold, Gold Trading Online, How to Invest Gold, Gold Price Chart

But you know how to identify overbought and oversold situation real? This article will review how to identify two things properly.

Real Bounce / Correction Real
The most important thing to be seen from the movement of the price is what happens when prices move fast enough, for example when the price goes down very sharply in a matter of minutes.
Consider the following graph:Trading Gold, Gold Trading Online, How to Invest Gold, Gold Price Chart
As shown in the graph above, the price observed a sharp decline (usually because no economic data released). The sharp decline that occurred at some point will experience burnout. If while stochastic is in oversold area and price then bounces back up (corrected), it can be said that the correction is a real correction.

Dead Cat Bounce / Correction False
This reversal occurs when the price did not experience a sharp movement but moving in a narrow range (sideways or consolidation).
In this case, if the stochastic example gives sinya oversold oversold then this is false, because the price just moved in a narrow range. Even sometimes the price could continue to decline to lower levels though the stochastic is in the oversold area.
Consider the following graph:Trading Gold, Gold Trading Online, How to Invest Gold, Gold Price Chart
Seen in the chart above that the price is moving sideways and the Stochastic Oscillator shows oversold indication. It is false oversold condition. If you follow the stochastic signaling Buy and you enter a Buy position then most likely you will get stuck. Can you see the prices rose only slightly, then down again even more sharply.
Well, after seeing the above case can at least be open-minded pal Trading Gold that is not always an indication of an overbought or oversold indicator will be followed by a reversal or correction.