What is Overbought?

Overbought is a subjective term that refers to an asset that has recently traded at an increased price relative to its perceived intrinsic or fair value, and may be expected to drop in price in the near term. However, an overbought price condition can last for a substantial amount of time, meaning that an immediate price decrease is not always the result in the short-term. Technical indicators are one of the main methodologies used to identify oversold or overbought assets by using data from many metrics such as relative strength index (RSI), Bollinger Bands, trading volume, and other metrics.