Overbought
Family VI · Charts & indicators
Not to be confused with oversold, rsi, stochastic oscillator.
Overbought is a chart-based label applied when an asset's price sits at the upper end of an oscillator's range, most commonly the Relative Strength Index (RSI) above 70 or the stochastic oscillator above 80. It describes the position of price within a bounded indicator, not a forecast that price must fall. Overbought readings can persist for extended periods during strong trends.
How overbought is measured
Overbought is not a single number; it is a threshold set on an oscillator. Common defaults include:
- RSI: above 70
- Stochastic oscillator: above 80
- Williams %R: above -20
These thresholds are conventions, not universal rules. Traders adjust them for the asset and timeframe, and different platforms may ship with different defaults.
Worked example
Interpretation and limits
An overbought reading indicates that recent gains have been large relative to recent losses over the lookback period. It does not indicate that price will reverse. In a sustained uptrend, RSI can remain above 70 for weeks. Many traders treat overbought as a condition to monitor rather than a standalone sell signal, and combine it with price structure, volume or trend filters.
Often confused with
- oversold
- Oversold describes a market condition in which an asset's price has fallen sharply and rapidly, often triggering technical indicators that suggest a potential bounce or reversal upward.
- rsi
- RSI (Relative Strength Index) is a bounded momentum oscillator, scaled from 0 to 100, that compares the average size of recent gains with the average size of recent losses over a chosen lookback period.
- stochastic oscillator
- A stochastic oscillator is a momentum indicator that compares a security's closing price to its price range over a set number of periods, producing two lines that fluctuate between 0 and 100.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci