How To Analyze The Market When Indicators Tell You It's Overbought

It’s a good problem to have.

When the market is ramping and you are in positions, it’s the best feeling in the trading world. The trade becomes easy. It’s like riding a bike with the wind at your back.

However, ramping markets become overbought. Once the market hits overbought levels, strength becomes a problem for two reasons.

  1. You don’t want to give up profits in current positions if the market pulls back
  2. Entring stops at overbought levels is tough. Risk reward often gets skewed and you don’t want to buy at the top and become the “dumb money”.

Does this mean you stop trading to the long stock when the market is overbought?

Not at all,

Overbought markets can become even more overbought.

That being said, you need to be more strategic and cautious in overbought markets.

In today’s video, I show you how to analyze an overbought market like we are currently in and how to strategically plan your trades. You will see why I took profits in one of my positions and my plan for existing positions. The video puts you in the mind of a trader, live in an overbought market.

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