foreign [Music] Ong and Welcome to our special IG series on trading mistakes now when investors who are relatively new to trading look at a chart and they might think it's oversold or overbought it's not always likely to be the case here to discuss this is senior market analyst Axel Rudolph Axel how many charts have you seen that kind of give us a good example of when this could happen loads loads I mean you can look at any chart you can see it all over again and again and again and here I've brought with me the Tesla chart a daily chart and you can see that at the bottom of the chart I've got this orange line which is the relative strength index the RSI and basically what it does as you can see here it sort of mimics the underlying Market it goes up when the market goes up and it goes down when the market or the underlying asset in this case Tesla goes down and you can see when it is below 30 percent when this oscillator dips below 30 it's considered to be oversold and you can see here the Tesla share price was oversold and dipped down to nearly 150 dollars back in April and then it rallied from there so in this case yes had you bought it when it was oversold it led to a very nice rally but you can see on the right hand side of this chart we are now above 70 here so according to the theory we are overboard and yet the Tesla share price continues to rise and rise and rise and rise and I'm really running out of space here it just continues to go up even though we are overbought so imagine you had sold the Tesla share price when it was starting to become overboard at around 200 and now it's trading at 280 dollars nearly you could have lost a lot of money so don't just go short when something is overboard and don't despise it if it's oversold you need to look at other things in conjunction with the indicator [Music]
