Oversold (forex oversold).

Supply and demand always actively influence pricing in any market; the greater the supply of similar goods, the lower the price for a given asset and vice versa, with increased demand and limited supply, the price only rises. In Forex, this aspect should be considered in relation to concluded contracts, so the basic concept here is oversold and overbought.

Oversold (forex oversold) - the predominance of contracts for the sale of currency in which there is a stop in the fall of prices, since the value of the currency pair stops falling. In this situation, a reversal of the downward trend in the opposite direction becomes more likely.

This term is used in relation to the base currency in a currency pair; in fact, this is the bottom of the so-called minimum for a given time period; such moments can be identified using a Forex oscillator or by visual analysis of the market situation.

If we consider oversold Forex using a specific example, we can observe the following situation.

After the increase in the supply of the euro, the market reacted with a downward trend and the value of the EURJPY currency pair went down.

This event led to the fact that the exchange rate dropped to a minimum, at which there were practically no people willing to sell the euro. The market has entered an oversold state. The reason for this phenomenon may be a strong level derived from historical data for past time periods or some other factor. The price at this moment is quite attractive, which provokes traders to open sell transactions, thereby causing an increase in demand and price growth; the trend first slows down, and then makes a reversal in the opposite direction and becomes upward. Moving until the market enters an overbought forex .

Thanks to the Stochastic oscillator, you can monitor the situation on the market and determine oversold in time; this tool has more than flexible settings. Using them, you can set the initial oversold limit at 10 or 20; crossing this limit in the upper direction is considered a buy signal.  

Oversold Forex is quite often used when trading on a reversal, and it is advisable to use price channels in stochastic