Overbought and Oversold

Overbought means that a bank’s assets and purchases of a particular foreign currency exceed its liabilities and sales of that currency. Where oversold means that a bank’s liabilities and sales in a particular foreign currency exceed the’ assets and purchases of that currency.

In order to avoid risk on account of exchange rate movements, the bank having an oversold position would correct it by buying that currency from the market and conversely, bank having an overbought position would sell that currency to the market.

Difference Between Overbought and OversoldInternational TradeOverbought and Oversold Overbought means that a bank’s assets and purchases of a particular foreign currency exceed its liabilities and sales of that currency. Where oversold means that a bank’s liabilities and sales in a particular foreign currency exceed the’ assets and purchases of that currency. In order to avoid risk...Investment analysis basics