Debt Conoslidation Articles

Is The Way We Look At “Overbought” And “Oversold” Right?

Probably since the day the markets opened people have been talking about them being either “overbought” or “undersold”. In reality only one of those terms makes any sense at all and that term is oversold. There is one case for this, and that is when the market is trading at zero. Undeniably that would be an oversold market! Unfortunately, for those who wish to use the term “overbought”, it is important to note that the market has unlimited upside potential. So this case can never really occur. So there is no such thing as overbought at all. A lot of types of investing programs try to tell you the opposite.

I suppose people mean some kind of relative term when they speak in this way. In this manner, “overbought” translates to the market is high (higher than it was before). Conversely when they say oversold, they mean that the market is lower than before and they think the market will go higher. That is the reasoning why I find the need to insist that I and others why agree to start using a more appropriate termonology. It really actually makes me quite excited to talk about. A revolutionary new concept. From now on I will advocate the use of the words almost to the opposite of the current lexicon being “underbought” and “undersold”. They have actually already caught on in some places like eminiforecaster.

So what is this “Underbought”? All that this means is that the market has not gone up as much as it will in the future. This means “undersold” occurs when the market has not declined enough to be where it will be at in the future. So these important key terms carry a whole different kind of meaning to their (rather meaningless) counterparts “overbought” and “oversold”.

I want to start a movement of future looking market participants that don’t dwell on the past. Let’s get over it and move on. The fact is the most successful investors in the world are forward looking market participants. They trade developing trends in the markets. They are anticipatory investors.