Overbought and oversold
A market is called overbought when it has risen fast and far, and oversold when it has fallen fast and far, according to an oscillator such as the RSI.
These ideas come from oscillators: RSI above 70 or stochastic above 80 for overbought, below 30 or 20 for oversold. They describe excess speed, not a price that is “too expensive” or “cheap”.
An overbought market can stay that way for a long time. During strong trends in gold or the Nasdaq 100, the daily RSI has spent weeks above 70. Selling for that reason alone means swimming against the current.
Treat these zones as context: in a range, they flag the likely edges; in a trend, they mainly remind you not to buy the top of a stretched move.