Momentum indicators to avoid price traps
Don't buy or sell just because the market reaches overbought or oversold levels
A common trap is selling as soon as the RSI reaches 70. In very strong trends, the indicator can remain above 70 while the price continues to rise and set new highs. Use overbought or oversold conditions only as a signal to be alert, not as a reason to enter a trade immediately.
Understanding divergence types:
Bearish divergence: The price makes a higher high + the indicator makes a lower high \leftarrow a sign of weakening buying pressure and an approaching decline.
Bullish divergence: The price makes a lower low + the indicator makes a higher low \leftarrow a sign of weakening selling pressure and an approaching rise.
$AMZNB $MSFTB $QQQB
Don't buy or sell just because the market reaches overbought or oversold levels
A common trap is selling as soon as the RSI reaches 70. In very strong trends, the indicator can remain above 70 while the price continues to rise and set new highs. Use overbought or oversold conditions only as a signal to be alert, not as a reason to enter a trade immediately.
Understanding divergence types:
Bearish divergence: The price makes a higher high + the indicator makes a lower high \leftarrow a sign of weakening buying pressure and an approaching decline.
Bullish divergence: The price makes a lower low + the indicator makes a higher low \leftarrow a sign of weakening selling pressure and an approaching rise.
$AMZNB $MSFTB $QQQB