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Oversold and overbought levels are usually selected by
experience and maybe not satisfactory for a certain Market.We can change
levels in order to give a more reliable description of the Market.
1. When we select 30, 70 , i.e. equal distance from 0, 100, we
have not any reasonto do it. Perhaps 24, 70 for example would be more
realistic.
2. I have the following idea:
I will examine the oversold time for each stock, I willtake
its average and so I willdefine the "mean oversold time (MOT)" for the
Market.This will be done for an oversold level which gives MOT >5% of
total days, else oversold is meaningless.
3. Then I will search for a certain overbought level which
gives the same "meanoverbought time". I consider this more fair for the
Market, whereas 30, 70 or 20, 80sounds abritary.In other words, I ask
levels which share the time equally for oversold and
overboughtphases.
Any opinion on this ?(The thought behind the curtain
is that buyers and sellers wait nearly the same time interval, until they
change the trend.)
(formulas are almost prepared, I want to discuss the basic
thought).
Best regardsDimitris Tsokakis
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