Every trader has heard of Overbought and Oversold, but not everyone understands their true meaning. Overbought is a situation where the asset's price has been bought excessively, causing the price level to be higher than it should be. Conversely, Oversold is the opposite, where the price has been sold off too much, falling below its true value. The importance of understanding these two conditions is to help traders recognize potential turning points in the market.