How to Determine Oversold Currency Pairs in online forex trading

When we trade forex we often see news about currency pairs that are oversold and that are going to soon bounce back. Traders will find these pieces of news to count a lot because they can mean a difference between losing and profiting. The problem is that there are many that do not understand the concept of oversold currency pair and how this affects the forex market.
When a currency pair is overbought or oversold we look at oscillating indicator ratings like Stochastic or RSI. An oscillator will try to map price trends and then compare them with what happened in the past. Oscillating indicators will use a 0 to 100 scale to make the measurements. RSI will show a value of 70 when in front of overbought while 30 is the default value for oversold. The Stochastic indicators will show values of 80 and 20.
Does an Oscillating Indicator Suit Your Personal Currency Trading Scheme?
Past market trends are used by oscillating indicators. They are going to try to relate the current trades with movements that have happened in the past. Thanks to this analysis a prediction of overbought or oversold position for each currency pair can be established. The indicators will work on the basis that any of the extreme will show market trend reversals. Unfortunately it does not always happen like this.
Any market that will move forward can keep showing the current trade even if the currency keeps being overbought for long periods of time. This can also happen when discussing falling markets that remain at oversold positions for many hours/days. Due to this fact we may be faced with huge losses when we only use such predictions to decide on trades. You will surely wonder why the indicators are still used since something like this can happen.
The truth is that it is really hard to predict market fluctuations. There is one advantage that oscillators have. When dealing with falling markets that show overbought indicators we will soon see reversals. In a similar way when we look at oversold ratings when faced with upward markets, the reversal can happen. Due to this oscillator prediction capability we will see these still being used.