Definition ∞ An oversold indicator is a technical analysis tool used in financial markets, including digital assets, to suggest that an asset’s price has fallen too far and too quickly. This typically implies that a price rebound may be imminent, as selling pressure might be exhausted. Common oversold indicators include the Relative Strength Index (RSI) when it drops below a certain threshold. It signals a potential buying opportunity based on price momentum.
Context ∞ The interpretation and reliability of oversold indicators in highly volatile crypto markets are subjects of continuous discussion among traders. A critical future development involves the refinement of these indicators with machine learning algorithms to better account for unique digital asset market dynamics. Debates often center on the timing of entry points based on these signals and their effectiveness without considering broader market sentiment.
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