Introduction
The overbought oversold indicator is an mt4 indicator that generates buy and sell signals based on an overbought/oversold histogram with high accuracy.
This indicator tells a trader about the sweet points where a price trend reversal can be expected. It is installed in MetaTrader 4 and is very easy to use because it will show the reversal points with an arrow above or below the candlestick.
How does the overbought oversold indicator work in mt4?
OB/OS mt4 indicator consists of a MACD histogram with a moving average line. The moving average line determines the trend direction, while the histogram bar measures the oversold or overbought conditions.
As price always moves in the form of cycles. After overbought conditions, the price will indeed move down, while the price will surely increase after oversold conditions because this is a natural pattern.
It is an oscillator in which the histogram bars oscillate around the zero line. The overbought oversold mt4 indicator displays a histogram in two different colors.
- Red bars: Histogram bars will have red color during a bearish price trend.
- Green bars: Histogram bars will have green color during a bullish price trend.
Buy/Sell signals
There are specific conditions on which this indicator generates buy or sell signals. It is unnecessary to learn about these conditions because the indicator will automatically display signs on the price chart.
Buy signal
The histogram bar and moving average line should be below the zero line. After this confirmation, an upward arrow will form on the price chart below the candlestick then place a buy order. Hold the trade until any other reversal signal does not develop.
Sell signal
The histogram bar and moving average line should be above the zero line. After this confirmation, a downward arrow will form on the price chart above the candlestick then place a sell order. It would be best to hold the trade until any other reversal signal does not develop.
The bottom line
Overbought oversold mt4 indicator has made it easy to identify price trend reversal points. You can also use this indicator with other technical tools like support/resistance zones to get high probability trade setups.
Trade only on higher timeframes like H4 and Daily timeframe to get a higher winning ratio.