I just truly understand what oversold really means and how much it can help our trading.

It’s a tool that not many people use properly. Oversold and overbought are signals that tell us when the price has been sold too cheaply or bought too much. If we understand this well, we won’t end up being the ones who buy at the highest prices or sell at the lowest prices.

In fact, oversold means a situation where an asset is sold off to the point that the price falls below what it should be. When oversold happens, the price often tends to reverse upward. Overbought is the opposite: the price is bought excessively so it becomes too high, and then it tends to correct downward.

To spot these conditions, most people mainly use RSI or the Stochastic Oscillator. These two work in a similar way. With RSI, if it’s above 70, that indicates overbought, and if it’s below 30, that indicates oversold. With Stochastic, it uses thresholds of 80 and 20 instead.

But here’s what most people miss: just because RSI indicates oversold doesn’t mean you should buy immediately. The price might still keep falling. You need confirmation from another tool—for example, check whether the price truly reverses, look at moving averages, or analyze price patterns.

The method I like to use is Mean Reversal. When the market doesn’t have a clear direction, I use MA200 as the middle reference, then wait for RSI to enter the oversold zone below 35. When the price reaches that point, I buy. I close the position when the price returns to MA25.

Another method is Divergence, which is more precise. Check whether the price is making a Lower Low, but RSI isn’t making a Lower Low along with it. That indicates selling pressure is weakening. This is a very good signal for buying.

In summary, oversold means there’s a buying opportunity, but you must use it correctly. Don’t buy directly just based on the signal—always wait for confirmation from other tools as well. If you do this, your trading will become much more accurate.