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Finance GlossaryOverbought
Overbought
Definition of Overbought
An overbought term refers to a security whose price has advanced sharply, and the broader market sentiment suggests that a price correction or reversal is likely to occur in the near future. It does not necessarily mean the price will go down, but that the upward momentum is unsustainable. Technical indicators such as the Relative Strength Index (RSI) or Stochastic Oscillator are widely used by traders for identifying overbought situations. An RSI above 70 is considered an overbought indicator.
Related Terms
Minority Interest
Minority Interest refers to the portion of a subsidiary’s equity that is owned by shareholders other than the parent company. It represents the non-controlling stake in the subsidiary’s profits and net assets. It is shown separately in consolidated financial statements to reflect ownership accurately.
Stop Loss Order
A stop loss order is an instruction to automatically sell a stock when a certain price is reached. This type of order helps investors limit potential losses and manage their risk. Stop loss orders are vital for intraday traders, particularly in volatile markets. Once a stop loss order is set, traders need not monitor the stock price constantly. This ensures peace of mind while they can protect their capital.
Return on Equity (ROE)
The Return on Equity is a metric that helps to find the how effectively a company uses the money of its shareholders to generate profits. The ROE can be obtained by dividing the new profit generated by the equity of shareholders. When a company has a higher ROE, it implies that it has a strong management and strong profitability. Investors often compare the companies within the same sector using the ROE. The ROE also helps investors determine the potential of the company to generate wealth in the long term.
Naked Option
Naked Option refers to an options position where the seller does not hold the underlying asset or a hedging position. This exposes the trader to potentially unlimited losses if the market moves sharply against the position. Naked options are generally considered high risk and are used by experienced traders only.
Dividend Stocks
Dividend stocks are shares of companies that redistribute their profits to shareholders in the form of dividends. Such companies are typically industry or sector leaders with stellar reputations and track records.
How much dividend a company offers can be calculated with the dividend yield ratio or dividend per share.
Investors prefer to buy dividend stocks because they can either reinvest the dividends to buy more shares or earn passive income. Examples of dividend stocks in India include:
How much dividend a company offers can be calculated with the dividend yield ratio or dividend per share.
Investors prefer to buy dividend stocks because they can either reinvest the dividends to buy more shares or earn passive income. Examples of dividend stocks in India include:
- Coal India
- Indian Oil Corporation (IOC)
- ONGC
- SAIL
- Tata Steel
Relative Vigor Index (RVI)
The Relative Vigor Index (RVI) is a technical oscillator comparing the closing price to the opening price relative to the day’s trading range, smoothed over periods. Positive values show bullish vigor as closes exceed opens, while negative signal bearish weakness. It helps confirm trends and spot divergences, often used alongside other indicators for trading signals.
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