There is a new type of overbought/oversold now. It's called statistical arbitrage. Things that trade against each other like stocks and bonds are one example. This can mean that while something may not look overbought on a single instrument chart, it is overbought relative to correlated instruments. Sophisticated systems trading this thing will identify this as an actionable mispricing relative to historical ratios, and position themselves accordingly. This is why when trading outright on minute charts, often the other traders seem to be making money but your trades don't show a profit. This stuff is happening in every market now. There are spreads on spreads on spreads being traded like this.... They see it as a way to take advantage of exchange membership and strip out risk from their trading operations.
This discussion has *everything* to do with appropriate periodicity -- or *set*of* more than one period of appropriate study. This is what so many don't get: whether your view stems from 1-minute or 1-day candles, buying and selling comes from the summed effects of market agendas that are invisible to us -- we can only see their net after-effects. But as those summed effects cause the collective rise or fall of price -- *that* we can see. The analogy that always seems to work best here is that of a harbor, where you have the natural wave action laid over that of a rising/falling tide. Big waves may echo the close pass of a large boat, additional small waves show the passing of smaller boats that were further away. But to think that one, single, "wave" is going to describe a market (whether "long" or "short" term) is radically too small a view. So, for example, to ask Gerald Appel whether his MACD should be laid out with 26/12/3 lookback parameters -- he'd respond (with a laugh & an eyeroll ) that there was *nothing* special about 26/12/3, and that it *happened* to work on the commodities' markets he was working at the time. That's it. He'd also point out that waves in the market can turn on a dime: one tweet, one memo, one text-message away from a 180° turn. And it's the same with every other "T/A" indicator: every trading platform in existence has technical indicators programmed with default lookbacks and the ability to change them. Doesn't anybody wonder why that is? [EDIT] Just received this (from a LinkedIn link), and it goes to the nature of price movement, jumps/diffusion, and even cites Albert Einstein -- so gather the neighborhood kids: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3479685 I respect the author *very* much -- known him for 10-15 years, always right-on, clear-thinking, solid. A higher-level article from which good nuggets will be had.
The same bullshit every time, indicators are a product of the behavior in the markets, so what he's saying that the traders changed their way of thinking, like to buy when the price is high or to sell when it's low......not real, or maybe that all the big players join hand to trade differently... these folks joining hands...funny. The only way I can relate to such a statement is if more traders look at price action softwares like Bookmap and less on indicators.
So the indicators are a continuation of the price which reflects people behavior. You right that a bios in thinking when trading shouldn't happen, but this refers to small players, not for the big one, a bios on how big players act is an indicator, without this bios the market will be really a roulette.
It is bias not bios - bios is entirely different thing that exists inside your pc. Price reflects the collective bias big and small. Show me where the big players bias is reflected by itself. Other than in the weekly, mostly irrelevant nowadays, COT.
Tom, Interesting that I just saw these posts by you and Mickey about noise in today's markets. Have been reading Kaufman's new edition of Trading Systems and Methods and he spends a fair amount of time addressing the issue. After describing his favorite method for measuring "noisiness" (sorry) using the Efficiency ratio, he backtests different trading approaches in markets that he considers to be either extremely noisy (S&P) or to have extreme trendiness (Eurodollar). Not unexpectedly, long-term trendfollowing systems did much better with the Eurodollar...
Great post -- about a great method from a fine author -- howsomeever, my post was sardonic, perhaps hoping to key in the OP the idea of an Average True Range computation. {cue Mr. Wrye Sardonici icon...) ""