Overbought
In technical analysis, the term “overbought” refers to a situation in which the price of a financial instrument has risen too far and too fast. An overbought condition suggests that buying interest has driven the price to unsustainable levels, and a correction or reversal might be imminent. Key points about overbought conditions: Relative Strength: Overbought conditions are often identified using technical indicators that measure an asset’s relative strength or momentum. Commonly used indicators include the Relative Strength Index (RSI), Stochastic Oscillator, and Williams %R. Indicator Thresholds: These technical indicators typically assign numerical values that range from 0 to 100. A reading above a certain threshold (often 70 for RSI, for example) is considered an overbought condition. However, the specific threshold might vary depending on the asset’s characteristics and market conditions.
Related Terms
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Moving Average Convergence Divergence (MACD)
- Oversold
- On Balance Volume (OBV)
- Trendline
- Mean Reversion
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Moving Average Convergence Divergence (MACD)
- Oversold
- On Balance Volume (OBV)
- Trendline
- Mean Reversion
- Moving Average (MA)
- Inverse Heads & Shoulders
- Heads & Shoulders
- Flag
- Drawdown
- Downtrend
- Double Top
- Double Bottom
- Distribution
- Descending Triangle
- Cup & Handle
- Consolidation
- Candlestick
- Breakout
- Breakdown
- Bollinger Bands
- Bearish Divergence
- Bullish Divergence
- Backtesting
- Ascending Triangle
- Accumulation
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- Variable annuity
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- Asset management
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- Automated teller machine
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- Operating expenses
- New fund offer
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- Rho
- Put Option
- Premium
- Out of the money
- Option Chain
- Open Interest
- Long Put
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- Intrinsic Value
- In the money
- Implied volatility
- Bull Put Spread
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- European Option
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