Overbought

Overbought describes a market condition in which price has risen unusually far or fast relative to its recent history, as measured by a momentum oscillator, implying the advance may be stretched and vulnerable to a pause or pullback. The most common yardstick is RSI above 70; the stochastic oscillator above 80 is another. The term refers to the pace of buying, not to any fundamental judgment that the asset is too expensive.

For example, if Solana climbs 40% in ten days and its daily RSI reads 85, the market is overbought by the standard definition: recent gains have overwhelmingly outweighed losses. A trader might respond by taking partial profits, tightening a stop, or simply declining to open new longs at that moment rather than selling outright.

The most important misconception to correct is that overbought means an imminent reversal; in strong bull trends, crypto assets routinely stay overbought for weeks while price continues higher, and shorting purely because an oscillator is elevated is a well-known way to lose money against a trend. Experienced traders treat overbought readings as context — a sign to be selective about entries and alert to reversal evidence like bearish divergence — rather than as a standalone sell signal.