Overbought refers to a security whose price is higher than its intrinsic value.
Many investors use price-earnings (P/E) ratios to determine if a stock is overbought, while traders use technical indicators such as the Relative Strength Index (RSI).
Fundamental analysis can also be used to compare the market price of an asset with its projected value based on financial statements or other underlying factors.
Ultimately, overbought is a subjective concept. Since all traders and analysts use different instruments, some may see an asset overbought, while others see an asset that should rise further.