Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Overbought.

When a security is believed to be trading at a level above what it should be valued, it is referred to as “overbought.”  A pre-assumption with overbought stocks is that the upward movement is a short-term phenomenon and that the market will correct the price in the near future.  This makes an overbought security a solid sale.  Determining if a stock is valued too highly can occur as a result of technical analysis of the securities price history.  However, “overbought” is also a subjective term.  Since traders, analysts, and investors use different tools and metrics, some may see a security as overbought while others argue it’s still on the way up.