What it means
Overbought is commonly used when an indicator such as RSI reaches a high reading, often around 70 or above. It suggests that recent upward movement has been strong.
Why it matters in live markets
Overbought readings can help traders observe when recent upward movement has become stretched. However, overbought does not mean price must fall. Strong trends can remain overbought for extended periods.
Key points
- Overbought often refers to a high RSI reading.
- It suggests recent upward movement has been strong.
- It does not guarantee a reversal.
- Strong trends can stay overbought longer than expected.
- Overbought is a context term, not a trading instruction.
Example
If RSI rises above 70 after several strong upward price moves, some traders may describe the market as overbought.
Related glossary terms
Relative Strength Index, Oversold, Momentum, Oscillator, Volatility
Where you will see it
You will usually see overbought discussed in RSI education, momentum analysis, technical indicator guides, and chart commentary.