overbought/oversold indicator

Definition

A technical analysis tool that attempts to define when prices have moved too far and fast in either direction. This is usually calculated based on a moving average of the difference between the number of advancing and declining issues over a certain period of time. If the market is considered overbought, the technical analyst will sell, and if the market is considered oversold, he/she will buy.

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The overbought/oversold indicator was very interesting to me and I learned how it impacted our every day business we conducted.

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They would often look at overbought/oversold indicators to determine if the prices were moving faster than they would have expected.

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overbought indicator