Overbought
A description of an oscillator reading above a conventional upper threshold, such as RSI above 70.
How it is identified
Test: oscillator value exceeds its conventional upper threshold, typically 70 for RSI or 80 for stochastics
Unit
qualitative
In depth
The word suggests a judgement about value that the indicator cannot make: overbought means only that recent gains have outweighed recent losses by a set ratio, which is what a rising security does by definition. This is why selling into overbought readings performs badly in sustained moves, where an oscillator can remain above its threshold for months. The threshold is a convention chosen decades ago for readability, not a level with any statistical standing. This dictionary uses the word to describe a reading and never to suggest that a price is too high or should be sold.
Worked example
RSI at 78 means average gains have been roughly 3.5 times average losses over the lookback window. In a strong advance the reading can hold above 70 for forty consecutive sessions while price rises another 25%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Overbought” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.