When the market is described as “oversold,” it generally means that asset prices have fallen significantly and are considered undervalued. This usually occurs after a period of sustained selling activity, where trader pessimism or external factors drive prices down. In an oversold market, the demand for assets is disproportionately low compared to their actual worth, making them relatively cheap.
Being “oversold” is like a green light for some traders, signaling a potential buying opportunity. However, it’s crucial to remember that just because something is oversold doesn’t mean it will immediately rebound. Prices can remain low for an extended period, especially if the underlying fundamentals are weak.
« Back to Glossary Index