Disparity index formula

Disparity index Indicator

A technical indicator measuring the relative position of the latest closing price of the selected moving average and reports the value as a percentage. Value greater than zero indicates that the asset is gaining upward momentum, while values ​​less than zero can be interpreted as a sign that selling pressure is increasing.

Extreme values ​​of this indicator can be a very useful tool for contrarian investors to predict periods of exhaustion. Once the price is excessively pushed in one direction, there are very few investors take the other side of the transaction when participants wish to close their position, ultimately leading to a price reversal. Similarly indicator Taiwan, important signals are generated when the indicator crosses over the zero line because this is the beginning of the dynamic signal building.

Steve Nison refers to its Disparity index "as a percentage of the latest display near the selected moving average. This can be defined in MetaStock using the formula:
((C - Mov (C, X,)) / Mov (C, X,)?) * 100
** Where X is the number of time periods? calculation is kind of moving average.
For example:
((C - Mov (C, 13 E)) / Mov (C, 13 E)) * 100
** Where X = 13 time periods? = Exponential moving average.
For interpretation of the disparity index refers to the book Steve Nison Candlesticks out which is available from EQUIS Direct catalog