over bought/oversld indicators

this may sound like a stupid question but i always hear people talking about how a stock is overbought or oversold can someone please tell me exactly how people draw the conclusion that a stock is over bought or oversold, or point me in the direction of a site i can go to to read about this indicator.
thx in advance for any help

 

Basically, it is when a market analyst suspects that the market, stock or futures is most prone for a reversal.

You may find this article ("Synthesis of Overall Market Indicators") of interest:

http://www.streetauthority.com/terms/o/overall.asp

Also, look at the bottom of this page and read "Overbought but no decline":

http://www.decisionpoint.com/TAcourse/TAcourseMenu.html

Charles

 

J. Welles Wilder's RSI and George Lane's Stochastics are two famous overbought/oversold indicators. There are literally hundreds of books and websites where you can find out complete details about them, including hybrids like StochRSI.

 

I used to be a big fan of stochastics, but then I decided that the best indicators are price and volume like many on these boards, I also use OBV to measure the volume etc. RSI never worked too well for me. If it has, please post...including the settings b/c there are so many RSI settings and stochastic settings. When I used stoch. i used full with 5,3,3 settings btw.

 

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dwl603777;
Good question,
and answer;
not very accurately at all in up/down trends.

If you like sideways trends, they maybe of some help;
Getting Started in Technical Analysis ,book by Jack Schwager

If you enjoy humor;
pay attention to CNBC guests inaccurately throwing around those terms.


Wisdom is the principal thing.

 

Did you use the 5,3,3 stoc setting on all of your analysis?

 

I was only using stochs for swing trading, so the answer is yes, it was the only setting I used

 

first off i want to start by saying thank you to everyone who has taken the time to respond to me

i think i dove head first into a question for which i know very little about, most of the research i have been doing so far has pertained to volume indicators and market profile, i really don't have any clue what stochastics are, i have heard of the arms index but i dont know what that is either can anyone please define these two in dummy terms for me i cant seem to find a definition of stochastics that is simple anywhere.

i thought overbought/oversold was just a volume thing, when you see a price where no one is willing to buy anymore it only has one way to go.