Exit Signals

An exit signal can be acted on in one of two ways. It can either be used as an indication that it is time to immediately close any long position in a given stock, or as an indication that it is time to place an exit stop order very close to the low point of the last few days.

Glossary

Overbought

The condition of a security or market which has experienced a substantial rise in price after a period of enthusiastic buying. The advance in price is considered unlikely to continue because desire to buy has been exhausted – i.e., all those who wanted to buy have already done so.

Oversold

The condition of a security or market that has gone through a rapid decline. If there is a long-term rising trend in place and that has not been broken, then when the desire to sell has been exhausted, the decline is likely to stop and reverse.

To get a deeper understanding of the meanings of “overbought” and “oversold”, read “Supply, Demand, and Price Distension” on our articles page.