Oversold
Oversold is a term used in the financial markets to describe a situation where the price of a security has dropped significantly below its true value. This can occur when there is a large amount of selling pressure in the market, or when investors become overly pessimistic about the security’s prospects. In such cases, the security is said to be oversold, and it may be a good time to buy the security as it is likely to rebound in the near future.
History of Oversold
The concept of oversold has been around for centuries, with the earliest references to it appearing in the writings of the ancient Greeks. Over the years, the concept has been refined and developed, and today it is a widely used tool in the financial markets. It is used by both professional and amateur investors to identify potential buying opportunities in the markets.
Oversold is often used in conjunction with technical analysis, which is the study of past price movements in order to predict future price movements. Technical analysts use a variety of indicators to identify oversold conditions, such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD). These indicators measure the momentum of a security’s price movements, and when they indicate that the security is oversold, it may be a good time to buy.
Comparisons
| Indicator | Oversold | Overbought |
|---|---|---|
| Relative Strength Index (RSI) | Below 30 | Above 70 |
| Moving Average Convergence Divergence (MACD) | Below 0 | Above 0 |
Summary
Oversold is a term used in the financial markets to describe a situation where the price of a security has dropped significantly below its true value. It is often used in conjunction with technical analysis, which is the study of past price movements in order to predict future price movements. For more information about oversold, investors can visit websites such as Investopedia and The Balance, which provide detailed explanations of the concept.
See Also
- Overbought
- Technical Analysis
- Relative Strength Index (RSI)
- Moving Average Convergence Divergence (MACD)
- Support and Resistance
- Trendlines
- Momentum
- Volatility
- Price Action
- Chart Patterns
