Overbought & Oversold Zones [SeikaAlgo] — Quick User Guide

What you’re looking at

• Blue line = Current momentum read.

• Orange line = Previous (a one-bar smoother “shadow” of the blue line).

• Horizontal guide bands:

  • +1.00 = Extreme Overbought

  • +0.67 = Overbought

  • 0.00 = Midline

  • −0.67 = Oversold

  • −1.00 = Extreme Oversold

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How to read it in 30 seconds

1. Zones first

   • Above +0.67: market is running hot.

   • Below −0.67: market is washed out.

   • Near 0: neutral, balance.

2. Extremes

   • Tagging +1 or −1 = an extreme. Strong moves can stay extreme longer than you think; don’t fade just because it touched the line.

3. Blue vs Orange (momentum turns)

   • Blue crosses up through Orange: momentum turning up.

   • Blue crosses down through Orange: momentum cooling/turning down. Use the crosses to time shifts after the zone gives you context.

4. Exits and cool-offs

   • From Overbought: watch for Blue to roll over, cross down through +0.67, and then below Orange. That often marks a pullback or pause.

   • From Oversold: watch for Blue to curl up, cross up through −0.67, and then above Orange. That often marks a bounce or relief.

Practical patterns to spot

• Strong run, then release Blue pinned near +1, then dips under +0.67 and under Orange → momentum is easing. Good place to take profits or tighten stops rather than chase.

• Capitulation and rebound Blue prints near −1, then hooks up through −0.67 and over Orange → selling pressure is easing. Consider scaling in or watching for your system’s long trigger.

Do’s and don’ts

Do

• Use zones for context and crosses for timing.

• Combine with your price-action or trend tool (for SeikaAlgo users: focus long setups when not overbought; focus short setups when not oversold).

• Think risk first: extremes are great for taking profits or tightening stops.

Don’t

• Auto-buy every dip or auto-short every rip. Extremes can persist.

• Treat one touch of ±0.67 as a reversal. Look for follow-through: the Blue/Orange cross helps.

Quick cheat sheet

• OB zone: > +0.67

• Extreme OB: ≈ +1.00

• OS zone: < −0.67

• Extreme OS: ≈ −1.00

• Upturn signal: Blue crosses above Orange, ideally rising out of OS.

• Downturn signal: Blue crosses below Orange, ideally rolling off OB.

Tips for beginners

• Start on higher timeframes to avoid noise.

• Use the indicator for filtering and exits first; add entries once you’re comfortable.

• Keep your chart clean. If the line is hugging an extreme, assume the trend still has control until the indicator actually releases from the zone and the cross confirms it.