I seldom look at ‘basic TA’ nor do I write or post charts with these on this site. I might as well say that I do not like these indicators alone but I do use them occasionally. I know there are also people that don’t care about price levels and wonders on what basis and how I analyze the market.
Not everything is meant to be shared and there is no such thing as ‘free lunch’ in life, that is why I don’t want to share my methods on the internet. This is basically why I here write about price levels (e.g bullish above this and bearish below that).
Let’s take a look at some basic TA-indicators, why do they work sometimes and then not? Used right, they can provide quite much help for the trader but there is more to the bigger picture than just oversold and overbought. An important factor is fear and greed. Please note that these basic indicators don’t tell the whole story about the instrument on which they are used! As an example, they don’t tell if big institutions are accumulating or distributing.
Below we have a quite classical oversold chart, in this example 4h DOW30, with RSI and MACD*. As you can see, oversold got more oversold and thus ‘buying the dip’ at the wrong time was not a good idea. Some say that the trend is your friend but I think this is also quite much BS, it never is that easy. Others say that ‘the news tells when the up-trend is over..’, well… the guys writing the news are only puppets to the master (= they only care about selling as much newspapers as possible). Quite often it is actually a good idea to exit long positions when the news are getting too good.
I will post a follow up post to this one later where we shall take a look at how basic TA’s are best used in times like now.
*RSI & MACD values in the example is not the default
