Counter Intuition for the beginning trader:
When a stock is hot, people want to buy and when it falls everyone thinks it’s done and want out. But, with a good understanding of how to read a chart, it’s actually exactly the opposite:
Oversold –> buy
Overbought –> sell
Riding the momentum of a trade is also good. But, technical indicators such as stochastics work by giving signals about how overbought or oversold a stock is.
October 12, 2007
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